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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
     
(Mark One)    
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended August 31, 2009
or
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from          to          
 
Commission file number 1-4304
 
 
Commercial Metals Company
(Exact name of registrant as specified in its charter)
 
     
Delaware
(State or other jurisdiction of
incorporation or organization)
  75-0725338
(I.R.S. Employer
Identification No.)
6565 MacArthur Blvd,
Irving, TX
(Address of principal executive offices)
  75039
(Zip Code)
 
 
Registrant’s telephone number, including area code:
(214) 689-4300
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
     
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
  New York Stock Exchange
 
 
Securities registered pursuant to Section 12(g) of the Act:
None
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 under the Securities Act. Yes  o   No  þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes  o   No  þ
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ   No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o   No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained herein, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or amendment to this Form 10-K.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  þ Accelerated filer  o Non-accelerated filer  o Smaller reporting company  o
                                       (Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o   No  þ
 
“The aggregate market value of the common stock on February 27, 2009, held by non-affiliates of the registrant, based on the closing price of $10.21 per share on February 27, 2009, on the New York Stock Exchange was approximately $1,122,561,086. (For purposes of determination of this amount, only directors, executive officers and 10% or greater stockholders have been deemed affiliates.)”
 
The number of shares outstanding of common stock as of October 26, 2009, was 112,631,450.
 
DOCUMENTS INCORPORATED BY REFERENCE:
 
Portions of the following document are incorporated by reference into the listed Part of Form 10-K:
 
Registrant’s definitive proxy statement for the annual meeting of stockholders to be held January 28, 2010 — Part III
 


 

COMMERCIAL METALS COMPANY
TABLE OF CONTENTS
             
        3  
  Business     3  
  Risk Factors     12  
  Unresolved Staff Comments     19  
  Properties     19  
  Legal Proceedings     20  
  Submission of Matters to a Vote of Security Holders     20  
        21  
  Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities     21  
  Selected Financial Data     24  
  Management's Discussion and Analysis of Financial Condition and Results of Operation     24  
  Quantitative and Qualitative Disclosures about Market Risk     40  
  Financial Statements and Supplementary Data     42  
  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     70  
  Controls and Procedures     70  
  Other Information     71  
        71  
  Directors and Executive Officers of the Registrant     71  
  Executive Compensation     72  
  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     72  
  Certain Relationships and Related Transactions     72  
  Principal Accountant Fees and Services     72  
        72  
  Exhibits, Financial Statement Schedules     72  
 
  Signatures     77  
  EX-3.(I)
  EX-3.(I)(A)
  EX-3.(I)(B)
  EX-3.(II)
  EX-4.(I)(E)
  EX-10.(I)(A)
  EX-10.(I)(C)
  EX-10.(III)(D)
  EX-10.(III)(E)
  EX-10.(III)(G)
  EX-10.(III)(Q)
  EX-12
  EX-21
  EX-23
  EX-31.(A)
  EX-31.(B)
  EX-32.(A)
  EX-32.(B)

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PART I
ITEM 1. BUSINESS
GENERAL
     We recycle, manufacture, fabricate and distribute steel and metal products and related materials and services through a network of locations throughout the United States and Internationally. Effective at the beginning of our 2008 fiscal year we realigned the management of our businesses into two operating divisions — the CMC Americas Division and the CMC International Division. We consider our business to be organized into five segments: Americas Recycling, Americas Mills, Americas Fabrication and Distribution, all operating as part of the CMC Americas Division, with the CMC International Division comprised of two segments, International Mills and International Fabrication and Distribution.
     We were incorporated in 1946 in the State of Delaware. Our predecessor company, a metals recycling business, has existed since approximately 1915. We maintain our executive offices at 6565 MacArthur Boulevard in Irving, Texas, telephone number (214) 689-4300. Our fiscal year ends August 31 and all references in this Form 10-K to years refer to the fiscal year ended August 31 of that year unless otherwise noted. Financial information for the last three fiscal years concerning our five business segments and the geographic areas of our operations is incorporated herein by reference from “Note 15. Business Segments” of the notes to consolidated financial statements which are in Part II, Item 8 of this Form 10-K.
     Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports will be made available free of charge through the Investor Relations section of our Internet website, http://www.cmc.com, as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. Except as otherwise stated in these reports, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we file with, or furnish to, the Securities and Exchange Commission.
CMC AMERICAS DIVISION OPERATIONS
AMERICAS RECYCLING SEGMENT
     The Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. This segment operates 42 scrap metal processing facilities with 20 locations in Texas, 7 in Florida, 4 in South Carolina, 2 in each of Alabama and Missouri, and one each in Arkansas, Georgia, Kansas, Louisiana, North Carolina, Oklahoma and Tennessee.
     We purchase ferrous and nonferrous scrap metals, processed and unprocessed, from a variety of sources in a variety of forms for our metals recycling plants. Sources of metal for recycling include manufacturing and industrial plants, metal fabrication plants, electric utilities, machine shops, factories, railroads, refineries, shipyards, ordinance depots, demolition businesses, automobile salvage and wrecking firms. Collectively, small scrap metal collection firms are a major supplier.
     In 2009, our scrap metal recycling segment’s plants processed and shipped approximately 2,033,000 tons of scrap metal compared to 3,391,000 tons in 2008. Ferrous scrap metals comprised the largest tonnage of metals recycled at approximately 1,817,000 tons, a decrease of approximately 1,236,000 tons as compared to 2008. We shipped approximately 203,000 tons of nonferrous scrap metals, primarily aluminum, copper and stainless steel, a decrease of approximately 102,000 tons as compared to 2008. With the exception of precious metals, our scrap metal recycling plants recycle and process practically all types of metal. In addition, one scrap metal recycling facility operated by our Americas Mills segment processed 304,000 tons of primarily ferrous scrap metal for consumption at the adjoining Americas Mills facility during 2009.
     Our scrap metal recycling plants typically consist of an office and warehouse building equipped with specialized equipment for processing both ferrous and nonferrous metal located on several acres of land that we use for receiving, sorting, processing and storing metals. Several of our scrap metal recycling plants use a small portion of their site or a nearby location to display and sell metal products that may be reused for their original purpose without further processing. We equip our larger plants with scales, shears, baling presses, briquetting machines, conveyors and magnetic separators which enable these plants to efficiently process large volumes of scrap metals.

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     Two plants have extensive equipment that segregates metallic content from large quantities of insulated wire. To facilitate processing, shipping and receiving, we equip our ferrous metal processing centers with presses, shredders or hydraulic shears to prepare and compress scrap metal for easier handling. Cranes are utilized to handle scrap metals for processing and to load material for shipment. Many facilities have rail access as processed ferrous scrap is primarily transported to consumers by open gondola railcar or barge when water access is available.
     Americas Recycling owns six large shredding machines, four in Texas and one in each of Florida and South Carolina, capable of pulverizing obsolete automobiles or other sources of scrap metal. We have three additional shredders, one operated by our Americas Mills segment and two by our International Mills segment.
     We sell scrap metals to steel mills and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary lead smelters, specialty steel mills, high temperature alloy manufacturers and other consumers. Ferrous scrap metal is the primary raw material for electric arc furnaces such as those operated by our Americas Mills segment and other minimills. Some minimills periodically supplement purchases of ferrous scrap metal with direct reduced iron and pig iron for certain product lines. Our Dallas office coordinates the sales of scrap metals from our scrap metal processing plants to our customers. We negotiate export sales through our network of foreign offices as well as our Dallas office.
     We do not purchase a material amount of scrap metal from one source. One customer represents 11% of our Americas Recycling segment’s revenues. Our recycling segment competes with other scrap metals processors and primary nonferrous metals producers, both domestic and foreign, for sales of nonferrous materials. Consumers of nonferrous scrap metals frequently can utilize primary or “virgin” ingot processed by mining companies instead of nonferrous scrap metals. The prices of nonferrous scrap metals are closely related to, but generally less than, the prices of primary or “virgin” ingot.
AMERICAS MILLS SEGMENT
     We conduct our Americas Mills operations through a network of:
    5 steel mills, commonly referred to as “minimills” or in the case of the Arizona mill a “micro mill” that produce one or more of reinforcing bar, angles, flats, rounds, small beams, fence-post sections and other shapes;
 
    a copper tube minimill; and
 
    one scrap metal shredder processing facility that directly supports the adjoining steel minimill.
     We operate four steel minimills which are located in Texas, Alabama, South Carolina and Arkansas and one micro mill located in Arizona. We utilize a fleet of trucks that we own as well as private haulers to transport finished products from the minimills to our customers and our fabricating shops. To minimize the cost of our products, to the extent feasibly consistent with market conditions and working capital demands, we prefer to operate all minimills near full capacity. Market conditions such as increases in quantities of competing imported steel, production rates at domestic competitors, customer inventory levels or a decrease in construction activity may reduce demand for our products and limit our ability to operate the minimills at full capacity. Through our operations and capital improvements, we strive to increase productivity and capacity at the minimills and enhance our product mix. Since the steel minimill business is capital intensive, we make substantial capital expenditures on a regular basis to remain competitive with other low cost producers. Over the past three fiscal years we have spent approximately $284 million or 31% of our total capital expenditures on projects at the steel minimills operated by our Americas Mills segment.
     Beginning in 2009, this segment operated a business that purchases and removes rail and other materials from abandoned railroads. Most of the salvaged rail is utilized by our Arkansas minimill. Prior to 2009, this operation was included in the Americas Recycling segment.

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     The following table compares the amount of steel (in short tons) melted, rolled and shipped by our four steel minimills in the past three fiscal years:
                         
    2009   2008   2007
Tons melted
    1,599,000       2,396,000       2,121,000  
Tons rolled
    1,478,000       2,101,000       1,957,000  
Tons shipped
    1,736,000       2,528,000       2,250,000  
     We acquired our largest steel minimill in 1963. It is located in Seguin, Texas, near San Antonio. In 1983, we acquired our minimill in Birmingham, Alabama, and in 1994 we acquired our minimill in Cayce, South Carolina. We have operated our smallest mill since 1987, and it is located near Magnolia, Arkansas. In September, 2009, we opened our newest mill, a “micro mill,” in Mesa, Arizona.
     The Texas, Alabama and South Carolina minimills each consist of:
    melt shop with electric arc furnace that melts ferrous scrap metal;
 
    continuous casting equipment that shape the molten metal into billets;
 
    reheating furnace that prepares billets for rolling;
 
    rolling mill that forms products from heated billets;
 
    mechanical cooling bed that receives hot product from the rolling mill;
 
    finishing facilities that cut, straighten, bundle and prepare products for shipping; and
 
    supporting facilities such as maintenance, warehouse and office areas.
     Descriptions of minimill capacity, particularly rolling capacity, are highly dependent on the specific product mix manufactured. Each of our minimills can and do roll many different types and sizes of products in their range depending on market conditions including pricing and demand. Therefore our capacity estimates assume a typical product mix and will vary with the products actually produced. Our Texas minimill has annual capacity of approximately 1,000,000 tons melted and 900,000 rolled. Our Alabama minimill’s annual capacity is approximately 700,000 tons melted and 575,000 tons rolled. We have annual capacity at our South Carolina minimill of approximately 800,000 tons melted and 900,000 tons rolled.
     Our Texas minimill manufactures a full line of bar size products including reinforcing bar, angles, rounds, channels, flats, and special sections used primarily in building highways, reinforcing concrete structures and manufacturing. It sells primarily to the construction, service center, energy, petrochemical, and original equipment manufacturing industries. The Texas minimill primarily ships its products to customers located in Texas, Louisiana, Arkansas, Oklahoma and New Mexico. It also ships products to approximately 22 other states and to Mexico. Our Texas minimill melted 746,000 tons during 2009 compared to 997,000 tons during 2008, and rolled 667,000 tons, a decrease of 125,000 tons from 2008.
     The Alabama minimill recorded 2009 melt shop production of 342,000 tons, a decrease of 334,000 tons from 2008. It rolled 235,000 tons, a decrease of 195,000 tons from 2008. The minimill primarily manufactures products that are larger in size as compared to products manufactured by our other three minimills. Such larger size products include mid-size structural steel products including angles, channels, beams of up to eight inches and special bar quality rounds and flats. It does not produce reinforcing bar. Our Alabama minimill sells primarily to service centers, as well as to the construction, manufacturing, and fabricating industries. The Alabama minimill primarily ships its products to customers located in Alabama, Georgia, Tennessee, North and South Carolina, and Mississippi.
     Our South Carolina minimill manufactures a full line of bar size products which primarily include steel reinforcing bar. The minimill also manufactures angles, rounds, squares, fence post sections and flats. The South Carolina minimill ships its products to customers located in the Southeast and mid-Atlantic areas which include the states from Florida through southern New England. During 2009 the minimill melted 511,000 tons and rolled 481,000 tons compared to 723,000 tons melted and 732,000 tons rolled during 2008.
     The primary raw material for our Texas, Alabama and South Carolina minimills is ferrous scrap metal. We purchase the raw material from suppliers generally within a 300 mile radius of each minimill including a substantial amount from the CMC Americas Recycling segment. Our Texas minimill runs an automobile shredding facility as a part of the mill operations with that entire shredder’s processed ferrous scrap consumed at the Texas minimill. We believe the supply of ferrous scrap metal is adequate to meet our future needs, but it has historically been subject to

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significant price fluctuations which have occurred more rapidly over the last five years. All three minimills also consume large amounts of electricity and natural gas. We have not had any significant curtailments and believe that supplies are adequate. The supply and demand of regional and national energy and the extent of applicable regulatory oversight of rates charged by providers affect the prices we pay for electricity and natural gas.
     The smaller Arkansas minimill does not have a melt shop or continuous casting equipment. The Arkansas minimill manufacturing process begins with a reheating furnace utilizing used rail primarily salvaged from railroad abandonments and excess billets acquired either from our other mills or unrelated suppliers as its raw material. The remainder of the manufacturing process utilizes a rolling mill, cooling bed and finishing equipment and support facilities similar to, but on a smaller scale, than those at our other minimills. The Arkansas minimill primarily manufactures metal fence post stock, small diameter reinforcing bar, sign posts and bed frame angles with some flats, angles and squares. At our Arkansas minimill and at our facilities in San Marcos, Texas, Brigham City, Utah, and West Columbia, South Carolina, we fabricate fence post stock into studded “T” metal fence posts. Since our Arkansas minimill does not have melting facilities, the minimill depends on an adequate supply of competitively priced used rail or billets. The availability of these raw materials fluctuates with the pace of railroad abandonments, rail replacement by railroads, demand for used rail from competing domestic and foreign rail rerolling mills and the level of excess billet production offered for sale at steel producers. We have annual capacity at our Arkansas minimill of approximately 150,000 tons rolled.
     In August, 2009, we began the commissioning process at our new mill in Arizona, designated a “micro mill” due to its relatively small estimated capacity of approximately 280,000 tons per year. The micro mill utilizes a “continuous continuous” design where metal flows uninterrupted from melting to casting to rolling. It is more compact than existing, larger capacity steel minimills taking advantage of both lower initial capital construction costs and ongoing operating efficiencies by focusing on cost-effective production of a limited product range, primarily reinforcing bar. Ferrous scrap will be sourced locally. A reinforcing bar fabrication facility is located on the same site. Full startup of this mill is anticipated in early fiscal year 2010.
     Our subsidiary, CMC Howell Metal Company, operates a copper tube minimill in New Market, Virginia, which manufacturers copper tube, primarily water tubing, for the plumbing, air conditioning and refrigeration industries. It recently supplemented its product line with selected steel products and copper fittings. Both high quality copper scrap and occasionally virgin copper ingot are melted, cast, extruded and drawn into tubing. The minimill supplies tubing in straight lengths and coils for use in commercial, industrial and residential construction and by original equipment manufacturers. Our customers, largely equipment manufacturers, wholesale plumbing supply firms and large home improvement retailers, are located in 44 states and supplied directly from the minimill as well as from or four warehouses. The demand for copper tube depends on the level of new apartment, hotel/motel and residential construction and renovation. Copper scrap is readily available, but subject to rapid price fluctuations. The price or supply of virgin copper causes the price of copper scrap to fluctuate rapidly. Our Americas Recycling segment supplies a portion of the copper scrap needed by CMC Howell. CMC Howell’s facilities include melting, casting, piercing, extruding, drawing, finishing and office facilities. During 2009, the facility produced approximately 46 million pounds of copper tube. CMC Howell has annual manufacturing capacity of approximately 80 million pounds.
     No single customer purchases 10% or more of our Americas Mills segment’s production. Due to the nature of certain stock products we sell in the Americas Mills segment, we do not have a long lead time between receipt of a purchase order and delivery. We generally fill orders for stock products from inventory or with products near completion. As a result, we do not believe that backlog levels are a significant factor in the evaluation of these operations. Backlog for our four steel minimills at August 31, 2009 was approximately $142 million as compared to $311 million at August 31, 2008. The Arizona micro mill was not yet fully commissioned as of this date.

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AMERICAS FABRICATION AND DISTRIBUTION SEGMENT
     We conduct our Americas Fabrication operations through a network of:
    steel plants that bend, cut, weld and fabricate steel, primarily reinforcing bar and angles;
 
    warehouses that sell or rent products for the installation of concrete;
 
    plants that produce special sections for floors and ceiling support;
 
    plants that produce steel fence posts; and
 
    plants that treat steel with heat to strengthen and provide flexibility.
      Steel Fabrication . Our Americas Fabrication group operates 74 facilities that we consider to be engaged in the various aspects of steel fabrication. Most of the facilities engage in general fabrication of reinforcing and structural steel with eight locations specializing in fabricating joists, special beams and decking for floor and ceiling support and four facilities fabricating only steel fence posts. We obtain steel for these facilities from our own minimills, purchases from other steel manufacturers through our distribution business and directly from unrelated steel vendors. In 2009, we shipped 1,424,000 tons of fabricated steel, a decrease of 302,000 tons from 2008.
     We conduct steel fabrication activities in facilities located in Arkansas at Little Rock and Hope; in Arizona at Chandler; California at Bloomington, Claremont, Emeryville (2), Etiwanda, Fontana (2), Fresno, Santee, Stockton, and Tracy; in Colorado at Brighton and Denver; in Florida at Fort Myers, Jacksonville, and Kissimmee; in Georgia at Garden City and Lawrenceville; in Illinois at Kankakee; in Louisiana at Baton Rouge, Keithville and Pearl River; in Mississippi at Lumberton; in North Carolina at Gastonia; in New Mexico at Albuquerque; in Nevada at Las Vegas (3); in Ohio at Cleveland; in Oklahoma at Oklahoma City and Tulsa; in South Carolina at Columbia and Taylors; in Tennessee at Nashville; in Texas at Beaumont, Buda, Corpus Christi, Dallas, Harlingen, Houston (2), Kennedale, Laredo, Melissa, Pharr, San Antonio, Seguin, Victoria, Waco and Waxahachie (2); and in Virginia at Farmville (2), Fredericksburg and Norfolk.
     Fabricated steel products are used primarily in the construction of commercial and non-commercial buildings, hospitals, convention centers, industrial plants, power plants, highways, bridges, arenas, stadiums, and dams. Generally, we sell fabricated steel in response to a bid solicitation from a construction contractor or the project owner. Typically, the contractor or owner of the project awards the job based on the competitive prices of the bids and does not individually negotiate with the bidders.
     Our joist manufacturing operations headquartered in Hope, Arkansas, manufacture steel joists for roof supports. The joist manufacturing operations fabricate joists from steel obtained primarily from our Americas Mill at facilities in Hope, Arkansas; Starke, Florida; Juarez, Mexico, Cayce and Eastover, South Carolina; Fallon, Nevada; Iowa Falls, Iowa; and New Columbia, Pennsylvania.. We manufacture steel deck, a companion product for joist sales, at facilities in South Plainfield, New Jersey; Peru, Illinois; and Rock Hill, South Carolina. Our typical joist and deck customer is a construction contractor or large chain store owner. Joists are generally made to order and sales may include custom design, fabrication and painting. Deck is often sold in combination with joists. We obtain our sales primarily on a competitive bid basis. We also manufacture and sell castellated and cellular steel beams. These beams, recognizable by their hexagonal or circular pattern of voids, permit greater design flexibility in steel construction, especially floor structures. We fabricate these beams at a facility adjacent to our Hope, Arkansas, joist manufacturing plant.
      Construction Services . We sell and rent construction related products and equipment to concrete installers and other construction businesses. We have 44 locations in Texas, Louisiana, Mississippi, South Carolina, Florida, Colorado, Arkansas, Arizona, New Mexico, Oklahoma, Utah, Idaho and California where we store and sell these products which, with the exception of a small portion of steel products, are purchased for resale from unrelated suppliers.

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      Heat Treating . Our subsidiary, AHT, Inc. operates plants in Chicora, Pennsylvania, Struthers, Ohio and Pell City, Alabama that heat treat steel products for special applications. AHT works closely with our Alabama minimill, other steel mills and our distribution business that sell specialized heat-treated steel for customer specific use. Such steel is primarily used in original or special equipment manufacturing where special hardening or flexibility is required. A portion of this steel is used for post-manufactured armor plating. We have annual operating capacity in our heat treating operation of approximately 125,000 tons. We also operate a warehousing and distribution operation known as CMC Impact Metals which distributes not only the specialized products provided by AHT, but also similar products obtained from other similar specialty processors located around the world.
      CMC Dallas Trading . Our Americas division distribution business consists of our CMC Dallas Trading operation. CMC Dallas Trading markets and distributes semi-finished, long, and flat steel products into the Americas which it purchases from a diverse base of international and domestic sources. During the past year, CMC Dallas Trading sold approximately 580 thousand tons of steel products through and with the assistance of our offices in Irving, Texas. Our network of offices in the International Fabrication and Distribution segment works closely with CMC Dallas Trading to share information regarding supply and demand for the products sold and assists with locating and maintains relationships with sources of supply.
     Backlog in our steel fabrication operations was approximately $621 million at August 31, 2009 as compared to $784 million at August 31, 2008. Other backlogs in the Americas Fabrication and Distribution segment are not considered material. No single customer accounts for 10% or more of our Americas Fabrication and Distribution segment’s sales.
CMC INTERNATIONAL DIVISION OPERATIONS
INTERNATIONAL MILLS SEGMENT
     Our Swiss subsidiary, CMC International AG owns two steel minimills — CMC Zawiercie S.A. (CMCZ) with operations at Zawiercie, Poland and CMC Sisak d.o.o. (CMCS) with operations at Sisak, Croatia. These two mills constitute the International Mills segment.
     CMCZ is a steel minimill with equipment similar to our domestic steel minimills, but also includes a second rolling mill which produces wire rod and a specialty rod finishing mill. We own all or a substantial interest in several smaller metals related operations, including fourteen scrap metals processing facilities in Poland that directly support CMCZ with approximately one-third of its scrap requirements.
     CMCZ has annual melting capacity of approximately 1,900,000 tons with annual rolling capacity of approximately 1,300,000 tons. During 2009, the facility melted 1,269,000 tons of steel compared to 1,502,000 tons the prior year; rolled 997,000 compared to the prior year’s 1,100,000 tons and shipped 1,258,000 tons compared to 1,434,000 tons during 2008. Principal products manufactured include rebar and wire rod as well as smaller quantities of merchant bar. CMCZ is a significant manufacturer of rebar and wire rod in Central Europe selling rebar primarily to fabricators, distributors and construction companies. Principal customers for wire rod are meshmakers, end users and distributors. CMCZ’s products are generally sold to customers located within a market area of 400 miles of the mill. The majority of sales are to customers within Poland with the Czech Republic, Slovakia, Hungary and Germany being the major export markets. Ferrous scrap metal is the principal raw material for CMCZ and is generally obtained from scrap metal processors and generators within 400 miles of the mill. Ferrous scrap metal, electricity, natural gas and other necessary raw materials for the steel manufacturing process are generally readily available although subject to periodic significant price fluctuations. A large capacity scrap metal shredding facility similar to the largest automobile shredder we operate in the United States is located at CMCZ and supplies CMCZ with a portion of its scrap metal requirements.
     During 2009 we had two significant expansions underway at CMCZ. Installation of a new wire rod block at a cost of approximately $40 million which was completed in the second quarter of fiscal 2009. This addition has increased capacity approximately 110,000 tons and enhanced CMCZ’s product range. We also began installation of a new rolling mill at an estimated cost of $190 million. The new mill, designed to allow efficient and flexible production of an increased medium section product range, will complement the facility’s existing rolling mill dedicated primarily to rebar production. The new mill will have a rolling capacity of approximately 716,000 tons of rebar, merchant bar and wire rod. The first phase of the new mill is expected to be completed during the first quarter of fiscal year 2010 while the second phase is expected to be completed at the end of fiscal year 2010 or during fiscal year 2011, and is in addition to CMCZ’s two existing rolling mills.

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     In September 2007, we acquired from the Croatian Privatization Fund all outstanding shares of Valjaonica Cijevi Sisak which we subsequently renamed CMCS. CMCS is an electric arc furnace steel pipe mill. Current melting capacity at CMCS is approximately 80,000 tons. We have announced plans to replace the existing 34 short ton electric arc furnace with a larger 67 short ton furnace and add a ladle furnace. These modifications will increase capacity to approximately 360,000 tons in the first phase and approximately 500,000 tons in the second phase, with the first phase expected to be completed during the second quarter of fiscal 2010. CMCS operates a seamless pipe mill. CMCS discontinued use of a cold processing mill and a welded mill during this fiscal year.
     CMCS has an annual capacity of about 116,000 short tons of steel pipe. Prior to our purchase the mill had been operating at minimal production rates due to inadequate financing, poorly maintained equipment and poor employee morale. We commenced what amounted to a restart of the facility, employing new key managers, reviewing and revising operating, maintenance and safety procedures, staffing requirements and analyzing potential capital improvements to increase productivity. CMCS melted 49,000 tons, rolled 63,000 tons and shipped 67,000 tons in 2009.
INTERNATIONAL FABRICATION AND DISTRIBUTION SEGMENT
     Our International Distribution operations buy and sell primary and secondary metals, fabricated metals and other industrial products. During the past year, the International Distribution facilities sold approximately 1.5 million tons of steel products. We market and distribute these products through a network of offices, processing facilities and joint venture offices located around the world. We purchase steel products, industrial minerals, ores, metal concentrates and ferroalloys from producers in domestic and foreign markets. Occasionally, we purchase these materials from suppliers, such as trading companies or industrial consumers, who have a surplus of these materials. We utilize long-term contracts, spot market purchases and trading or barter transactions to purchase materials. To obtain favorable long term supply agreements, we occasionally offer assistance to producers by arranging structured finance transactions to suit their objectives. Our exposure to these structured finance transactions is negligible to our business. See discussion in Note 12, Commitments and Contingencies, to our consolidated financial statements.
     We sell our products to customers, primarily manufacturers, in the steel, nonferrous metals, metal fabrication, chemical, refractory and transportation businesses. We sell directly to our customers through and with the assistance of our offices in Fort Lee, New Jersey; Sydney, Perth, Melbourne, Brisbane and Adelaide, Australia; Singapore; Zug, Switzerland; Kürten, Germany; Curditt, UK; Temse, Belgium; Hong Kong; Beijing, Guangzhou and Shanghai China. We have a representative office in Moscow. We have agents or joint venture partners in additional offices located in significant international markets. Our network of offices share information regarding demand for our materials, assist with negotiation and performance of contracts and other services for our customers, and identify and maintain relationships with our sources of supply.
     In most transactions, we act as principal by taking title and ownership of the products. We are at times designated as a marketing representative, sometimes exclusively, by product suppliers. We utilize agents when appropriate, and on occasion we act as a broker for these products. We buy and sell these products in almost all major markets throughout the world where trade by American-owned companies is permitted.
     We market physical products as compared to companies that trade commodity futures contracts and frequently do not take delivery of the commodity. As a result of sophisticated global communications, our customers and suppliers often have easy access to quoted market prices, although such price quotes are not always indicative of actual transaction prices. Therefore, to distinguish ourselves we focus on value added services for both sellers and buyers. Our services include actual physical market pricing and trend information in contrast to market information from more speculative metal exchange futures, and technical information and assistance, financing, transportation and shipping (including chartering of vessels), storage, warehousing, just-in-time delivery, insurance, hedging and the ability to consolidate smaller purchases and sales into larger, more cost efficient transactions. These services are performed in the normal course of business and the majority are included in the transaction price as there is no separate revenue stream for each service. We attempt to limit exposure to price fluctuations by offsetting purchases with concurrent sales. We also enter into currency exchange contracts as economic hedges of sales and purchase commitments denominated in currencies other than the U.S. dollar or the functional currency of our international subsidiaries. Our policies are designed to prohibit speculation on changes in the markets.
     We have previously made investments to acquire approximately 11% of the outstanding stock of a Czech Republic long products steel mill and 24% of a Belgium business that processes and pickles hot rolled steel coil.

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These investments allow us to expand our marketing and distribution activities by selling a portion of the products they produce and on occasion supplying a portion of their raw material requirements.
     Our Australian operations are believed to be the largest marketer of imported steel in Australia. We utilize warehouse facilities at several Australian ports to facilitate distribution, including just-in-time delivery and logistics management. Our CMC Coil Steels Group is a major distributor and processor of steel sheet and coil products predominately procured from Australian sources and has recently expanded into distribution of long products including reinforcing bar. Coil Steels operates processing facilities in Brisbane, Sydney and Melbourne, warehouses in Adelaide and Perth and smaller regional sales outlets including Darwin and Toowoomba. The Australian operations also operate an industrial products distribution business supplying metals related industries including steel mills, foundries and smelters. In 2008, we acquired the assets of a small Sydney based ferrous and non-ferrous recycling facility.
     Our International Fabrication operations have expanded downstream captive uses for a portion of the rebar and wire rod manufactured at CMCZ with construction of a reinforcing bar fabrication facility at CMCZ and the acquisition of rebar fabrication facilities in Rosslau, Germany as well as having commenced operation of a new fabrication facility in Zyrardow, near Warsaw. These three rebar fabrication facilities are similar to those operated by our domestic fabrication facilities and sell fabricated rebar to contractors for incorporation into construction projects generally within 150 miles of each facility. In 2008 we acquired Nike S.A. located in Dabrowa Górnicza, Poland which merged with our downstream operation, CMC Poland, in fiscal year 2009. This operation is a producer of welded steel mesh, cold rolled wire rod and cold rolled reinforcing bar with total production capacity of approximately 99,000 tons of steel products annually. This acquisition enables our International Fabrication operations to supplement sales of fabricated reinforcing bar by also offering wire mesh to customers including metals service centers as well as construction contractors.
     In 2008 we acquired a recycling facility in Singapore. The facility is similar to those operated by the Recycling segment of CMC Americas but on a smaller scale, and is operated as part of the International Fabrication and Distribution segment due to its oversight by managers in this segment.
     For a discussion of the risks attendant to our foreign operations, see “Risk Factors — Operating Internationally Carries Risks and Uncertainties which Could Negatively Affect Our Results of Operations.”
     For financial data on the above segments, see “Financial Statements and Supplementary Data — Note 15, Business Segments.”
SEASONALITY
     Many of our mills and fabrication facilities’ customers are in the construction business. Due to the increase in construction during the spring and summer months, our sales are generally higher in the third and fourth quarters than in the first and second quarters of our fiscal year.
COMPETITION
     We believe our Americas Recycling segment is one of the largest entities engaged in the recycling of nonferrous scrap metals in the United States. We are also a major regional processor of ferrous scrap metal. The scrap metal recycling business is subject to cyclical fluctuations based upon the availability and price of unprocessed scrap metal and the demand for steel and nonferrous metals. Buying prices and service to scrap suppliers and generators are the principal competitive factors for the recycling segment. The price offered for scrap metal is the principal competitive factor in acquiring material from smaller scrap metals collection firms, while industrial generators of scrap metal may also consider the importance of other factors such as supplying appropriate collection containers, timely removal, reliable documentation including accurate and detailed purchase records with customized reports, the ability to service multiple locations, insurance coverage, and the buyer’s financial strength.
     Our Americas Mills compete with regional, national and foreign manufacturers of steel and copper. We do not produce a significant percentage of the total domestic output of most of our products. However, we are considered a substantial supplier in the markets near our facilities. We compete primarily on the price and quality of our products and our service. See “Risk Factors - Risks Related to Our Industry.”

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     Our Americas Fabrication business competes with regional and national suppliers. We believe that we are among the largest fabricators of reinforcing bar in the United States, and our joist facilities are the second largest manufacturer of joists in the United States, although significantly smaller than the largest joist supplier. We believe that we are the largest manufacturer of steel fence posts in the United States.
     We believe that CMCZ is the second largest supplier of wire rod and the second largest supplier of reinforcing bar in the Polish market. It competes with several large manufacturers of rebar and wire rod in Central and Eastern Europe, primarily on the basis of price and product availability.
     Our distribution business is highly competitive. Our products in the distribution business are standard commodity items. We compete primarily on the price, quality and reliability of our products, our financing alternatives and our additional services. In this business, we compete with other domestic and foreign trading companies, some of which are larger and may have access to greater financial resources. In addition, some of our competitors may be able to pursue business without being restricted by the laws of the United States. We also compete with industrial consumers who purchase directly from suppliers, and importers and manufacturers of semi-finished ferrous and nonferrous products. Our CMC Coil Steels Group, a distributor of steel sheet and coil in Australia, is believed to be the third largest distributor of those products in Australia.
ENVIRONMENTAL MATTERS
     A significant factor in our business is our compliance with environmental laws and regulations. See “Risk Factors — Risks Related to Our Industry” below. Compliance with and changes in various environmental requirements and environmental risks applicable to our industry may adversely affect our results of operations and financial condition.
     Occasionally, we may be required to clean up or take certain remediation action with regard to sites we formerly used in our operations. We may also be required to pay for a portion of the costs of clean up or remediation at sites we never owned or on which we never operated if we are found to have treated or disposed of hazardous substances on the sites. The U.S. Environmental Protection Agency, or EPA, has named us a potentially responsible party, or PRP, at several federal Superfund sites. The EPA alleges that we and other PRP scrap metal suppliers are responsible for the cleanup of those sites solely because we sold scrap metal to unrelated manufacturers for recycling as a raw material in the manufacturing of new products. We contend that an arms length sale of valuable scrap metal for use as a raw material in a manufacturing process that we have no control of should not constitute “an arrangement for disposal or treatment of hazardous substances” as defined under federal law. In 2000 the Superfund Recycling Equity Act was signed into law which, subject to the satisfaction of certain conditions, provides legitimate sellers of scrap metal for recycling with some relief from Superfund liability under federal law. Despite Congress’ clarification of the intent of the federal law, some state laws and environmental agencies still seek to impose such liability. We believe efforts to impose such liability are contrary to public policy objectives and legislation encouraging recycling and promoting the use of recycled materials and we continue to support clarification of state laws and regulations consistent with Congress’ action.
     New federal, state and local laws, regulations and the varying interpretations of such laws by regulatory agencies and the judiciary impact how much money we spend on environmental compliance. In addition, uncertainty regarding adequate control levels, testing and sampling procedures, new pollution control technology and cost benefit analysis based on market conditions impact our future expenditures in order to comply with environmental requirements. We cannot predict the total amount of capital expenditures or increases in operating costs or other expenses that may be required as a result of environmental compliance. We also do not know if we can pass such costs on to our customers through product price increases. During 2009, we incurred environmental costs including disposal, permits, license fees, tests, studies, remediation, consultant fees and environmental personnel expense of approximately $24 million. In addition, we estimate that we spent approximately $5 million during 2009 on capital expenditures for environmental projects. We believe that our facilities are in material compliance with currently applicable environmental laws and regulations. We anticipate capital expenditures for new environmental control facilities during 2010 of approximately $10 million.
EMPLOYEES
     During the past year, the Company has adjusted its workforce by implementing global reductions in force of approximately 2,600 employees, with approximately 2,100 of those reductions affecting employees in the U.S. As of August 31, 2009, we had 13,586 employees. The Americas Recycling segment employed 1,654 people, the Americas Mills segment employed 2,074 people, the Americas Fabrication and Distribution segment employed

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5,314 people, the International Mills segment employed 3,135 people and the International Fabrication and Distribution segment employed 842 people. As of August 31, 2009, we had 567 employees providing services to our divisions and subsidiaries in shared service operations, general corporate administration (including treasury, tax, IT, internal audit and other services), and management. Production employees at one metals recycling plant and two fabrication facilities are represented by unions for collective bargaining purposes. Approximately one half of International Mills’ employees are represented by unions. We believe that our labor relations are generally good to excellent and our work force is highly motivated.
ITEM 1A. RISK FACTORS
     Before making an investment in our company, you should be aware of various risks, including those described below. You should carefully consider these risk factors together with all of the other information included in this annual report on Form 10-K. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently deem to be immaterial may also materially and adversely affect our business, financial condition, results of operations or cash flows. If any of these risks actually occur, our business, financial condition, results of operations or cash flows could be materially adversely affected and you may lose all or part of your investment.
RISKS RELATED TO OUR INDUSTRY
OUR INDUSTRY IS AFFECTED BY CYCLICAL AND GLOBAL ECONOMIC FACTORS INCLUDING THE RISK OF A RECESSION AND OUR CUSTOMERS’ ACCESS TO CREDIT FACILITIES.
     Our financial results are substantially dependent upon the overall economic conditions in the United States and the European Union. A continued recession in the United States, the European Union, or globally — or the public perception that a recession is continuing — could substantially decrease the demand for our products and adversely affect our business. Many of our products are commodities subject to cyclical fluctuations in supply and demand in metal consuming industries and construction. Metals industries have historically been vulnerable to significant declines in consumption and product pricing during prolong periods of economic downturn. Likewise the pace of construction has historically slowed significantly during economic downturns. Many of our customers rely on access to credit to adequately fund their operations or to finance construction projects. The inability of our customers to access credit facilities will adversely affect our business by reducing our sales, increasing our exposure to accounts receivable bad debts and reducing our profitability. Our geographic concentration in the southern and southwestern United States as well as Central Europe, Australia, China, and the Middle East exposes us to the local market conditions in these regions. Economic downturns in these areas or decisions by governments that have an impact on the level and pace of overall economic activity in a particular region could also adversely affect our sales and profitability.
     Our business supports cyclical industries such as commercial, residential and government construction, energy, metals service center, petrochemical and original equipment manufacturing. These industries may experience significant fluctuations in demand for our products based on economic conditions, energy prices, consumer demand and decisions by governments to fund infrastructure projects such as highways, schools, energy plants and airports. Many of these factors are beyond our control. As a result of the volatility in the industries we serve, we may have difficulty increasing or maintaining our level of sales or profitability. If the industries we serve suffer a prolonged downturn, then our business may be adversely affected. Although the residential housing market is not a significant direct factor in our business, related commercial and infrastructure construction activities, such as shopping centers and roads could be impacted by a prolonged slump in new housing construction.
     Our industry is characterized by low backlogs, which means that our results of operations are promptly affected by short-term economic fluctuations.
A SIGNIFICANT REDUCTION IN CHINA’S STEEL CONSUMPTION OR INCREASED CHINESE STEEL PRODUCTION SUBSTANTIALLY EXCEEDING LOCAL DEMAND MAY RESULT IN CHINA BECOMING A LARGE EXPORTER OF STEEL AND DISRUPTION TO WORLD STEEL MARKETS.
     Chinese economic expansion has affected the availability and heightened the volatility of many commodities that we market and use in our manufacturing process, including steel. It is reported that in calendar year 2008 China produced approximately 510 million metric tons of crude steel, representing 38% of world production. China’s estimated consumption was approximately 448 million metric tons and was a net exporter of approximately 52 million tons in 2008. Expansions and contractions in China’s economy can have major effects on the pricing of not only the price of our finished steel products but also many commodities that affect us such as secondary metals, energy, marine freight rates, steel making supplies such as ferroalloys and graphite electrodes and materials we

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market such as iron ore and coke. Should Chinese demand weaken or Chinese steel production be allowed to expand unchecked to the point that it significantly exceeds the country’s consumption, prices for many of the products that we both sell to and export from China may fall causing erosion in our gross margins and subjecting us to possible renegotiation of contracts or increases in bad debts. Significant exports from China of steel in the product lines we manufacture would cause selling prices to decline and negatively impact our gross margins.
RAPID AND SIGNIFICANT CHANGES IN THE PRICE OF METALS COULD NEGATIVELY IMPACT OUR INDUSTRY.
     Prices for most metals in which we deal have experienced increased volatility over the last several years. More recently steel prices sharply declined from their peaks and are at still relatively low levels.. However, should metals prices experience further substantial rapid decreases or increases it would impact us in several ways. Some of our operations, the fabrication operations for example, may benefit from rapidly decreasing steel prices as their material cost for previously contracted fixed price work declines. Others, such as our Americas Mills and International Mills segments, would likely experience reduced margins and may be forced to liquidate high cost inventory at reduced margins or losses until prices stabilized. Sudden increases could have the opposite effect. Overall, we believe that rapid substantial price changes, would not be to our industry’s benefit. Our customer and supplier base would be impacted due to uncertainty as to future prices. A reluctance to purchase inventory in the face of extreme price decreases or sell quickly during a period of rapid price increases would likely reduce our volume of business. Marginal industry participants or speculators may attempt to participate to an unhealthy extent during a period of rapid price escalation with a substantial risk of contract default should prices suddenly reverse. Risks of default in contract performance by customers or suppliers as well as an increased risk of bad debts and customer credit exposure would increase during periods of rapid and substantial price changes.
EXCESS CAPACITY IN OUR INDUSTRY COULD INCREASE THE LEVEL OF STEEL IMPORTS INTO THE UNITED STATES RESULTING IN LOWER DOMESTIC PRICES WHICH WOULD ADVERSELY AFFECT OUR SALES, MARGINS AND PROFITABILITY.
     Steel-making capacity exceeds demand for steel products in some countries. Rather than reducing employment by rationalizing capacity with consumption, steel manufacturers in these countries (often with local government assistance or subsidies in various forms) have traditionally periodically exported steel at prices significantly below their home market prices and which may not reflect their costs of production or capital. This supply of imports can decrease the sensitivity of domestic steel prices to increases in demand or our ability to recover increased manufacturing costs.
COMPLIANCE WITH AND CHANGES IN ENVIRONMENTAL AND REMEDIATION REQUIREMENTS COULD RESULT IN SUSTANTIALLY INCREASED CAPITAL REQUIREMENTS AND OPERATING COSTS.
     Existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations, may have a material adverse effect on our results of operations and financial condition. Compliance with environmental laws and regulations is a significant factor in our business. We are subject to local, state, federal and international environmental laws and regulations concerning, among other matters, waste disposal, air emissions, waste and storm water effluent and disposal and employee health. New facilities that we may build, especially steel minimills, are required to obtain several environmental permits before significant construction or commencement of operations. Delays in obtaining permits or unanticipated conditions in such permits could delay the project or increase construction costs or operating expenses. Our manufacturing and recycling operations produce significant amounts of by-products, some of which are handled as industrial waste or hazardous waste. For example, our minimills generate electric arc furnace dust (EAF dust), which the EPA and other regulatory authorities classify as hazardous waste. EAF dust requires special handling, recycling or disposal.
     In addition, the primary feed materials for the shredders operated by our scrap metal recycling facilities are automobile hulks and obsolete household appliances. Approximately 20% of the weight of an automobile hull consists of unrecyclable material known as shredder fluff. After the segregation of ferrous and saleable non-ferrous metals, shredder fluff remains. We, along with others in the recycling industry, interpret Federal regulations to require shredder fluff to meet certain criteria and pass a toxic leaching test to avoid classification as a hazardous waste. We also endeavor to remove hazardous contaminants from the feed material prior to shredding. As a result, we believe the shredder fluff we generate is not normally considered or properly classified as hazardous waste. If the laws, regulations or testing methods change with regard to EAF dust or shredder fluff, we may incur additional significant expenditures.

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     Although we believe that we are in substantial compliance with all applicable laws and regulations, legal requirements are changing frequently and are subject to interpretation. New laws, regulations and changing interpretations by regulatory authorities, together with uncertainty regarding adequate pollution control levels, testing and sampling procedures, new pollution control technology and cost benefit analysis based on market conditions are all factors that may increase our future expenditures to comply with environmental requirements. Accordingly, we are unable to predict the ultimate cost of future compliance with these requirements or their effect on our operations. We cannot predict whether such costs can be passed on to customers through product price increases. Competitors in various regions or countries where environmental regulation might not be so restrictive, subject to different interpretation or generally not enforced, may enjoy a competitive advantage.
     We may also be required to conduct additional clean up at sites where we have already participated in remediation efforts or to take remediation action with regard to sites formerly used in connection with our operations. We may be required to pay for a portion of the costs of clean up or remediation at sites we never owned or on which we never operated if we are found to have arranged for treatment or disposal of hazardous substances on the sites. In cases of joint and several liability, we may be obligated to pay a disproportionate share of cleanup costs if other responsible parties are financially insolvent.
RISKS RELATED TO OUR COMPANY
POTENTIAL LIMITATIONS ON OUR ABILITY TO ACCESS CREDIT FACILITIES MAY NEGATIVELY IMPACT OUR BUSINESS.
     Although we believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities (see the discussion at page 36 of our liquidity), we could be adversely affected if our banks, the buyers of our commercial paper or other of the traditional sources supplying our short term borrowing requirements refused to honor their contract commitments or ceased lending. While we believe the lending institutions participating in our credit arrangements are financially capable, recent events in the global credit markets, including the failure, takeover or rescue by various government entities of major financial institutions, have created uncertainty of credit availability to an extent not experienced in recent decades. Our commercial paper program is ranked in the second highest category by Moody’s Investors Service (P-2) and the third highest by Standard & Poor’s Corporation (A-3). Our senior unsecured debt is investment grade rated by Standard & Poor’s Corporation (BBB) and Moody’s Investors Service (Baa2). In determining our credit ratings, the rating agencies consider a number of both quantitative and qualitative factors. These factors include earnings, fixed charges such as interest, cash flows, total debt outstanding, off balance sheet obligations and other commitments, total capitalization and various ratios calculated from these factors. The rating agencies also consider predictability of cash flows, business strategy and diversity, industry conditions and contingencies. Lower ratings on our commercial paper program or our senior unsecured debt could impair our ability to obtain additional financing and will increase the cost of the financing that we do obtain.
WE HAVE INITIATED IMPLEMENTATION OF AN ENTERPRISE RESOURCE PLANNING SYSTEM WHICH, IF NOT EFFECTIVELY MANAGED AND CONTROLLED, COULD THREATEN THE ACHIEVEMENT OF OPERATION AND FINANCIAL GOALS.
     In 2006 we began planning and design of a new enterprise resource planning system which continued through 2007 with phased implementation during 2008 and 2009 and currently scheduled to continue through the next several years. There are risks that the effort may not result in a successful implementation resulting in resources being inappropriately diverted, untimely completion, substantial cost overruns, or inadequate information to manage our businesses and prepare accurate financial information. Should the project not be successfully completed the capitalized cost for this project might have to be expensed resulting in an unanticipated reduction in profitability.
SOME OF OUR CUSTOMERS MAY DEFAULT ON THE DEBTS THEY OWE TO US.
     Should the recent constraints on access to credit continue for a prolonged period some of our customers may struggle or fail to meet their obligations, especially if they in turn experience defaults on receivables due from their customers. A continued recession could result in our incurring bad debt costs in excess of our expectations and prior experience. In certain markets we have experienced a consolidation among those entities to whom we sell. This consolidation, along with higher metals and other commodity prices, has resulted in an increased credit risk spread

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among fewer customers often without a corresponding strengthening of their financial status. We have expanded our use of credit insurance for accounts receivable in our businesses. While we believe the insurance companies with whom our accounts receivable are insured are capable of meeting their contract obligations, it is possible that we may not be capable of recovering all of our insured losses should they experience significant losses threatening their viability. Additionally, credit insurance policies typically have relatively short policy periods and require pre-approval of customers with maximum insured limits established by customer. Should credit insurers incur large losses, the insurance may be more difficult to secure and when available likely only at increased costs with decreased coverage. While in many international sales transactions we require letters of credit from financial institutions which we believe to be financially secure, we may be at risk in the event the financial institution subsequently fails and the customer is unable to pay for the products we sold. A substantial amount of our accounts receivable are considered to be open account uninsured accounts receivable. We regularly maintain a substantial amount of accounts receivable, at year end $773 million. During the fiscal year, we incured bad debt expense of $34 million, charged off accounts receivable of $13 million and had recoveries of $3 million and at year end our allowance for collection losses was $42 million.
POTENTIAL IMPACT OF OUR CUSTOMERS’ NON-COMPLIANCE WITH EXISTING COMMERCIAL CONTRACTS AND COMMITMENTS.
     Most consumers of the metals products we sell have been negatively impacted by the recession. Many of our customers have experienced reductions, some substantial, in their operations. Prices for many of the metals products we sell have declined, some substantially. These factors have contributed to attempts by some customers to seek renegotiation or cancellation of their existing purchase commitments. Some of our customers have breached previously agreed upon contracts to buy our products by refusing delivery of the products. Where appropriate we have and will in the future pursue litigation to recover our damages resulting from customer contract defaults. A large number of our customers defaulting on existing contractual obligations to purchase our products, would have a material impact on our results of operations.
THE AGREEMENTS GOVERNING THE NOTES AND OUR OTHER DEBT CONTAIN FINANCIAL COVENANTS AND IMPOSE RESTRICTIONS ON OUR BUSINESS.
     The indenture governing our 5.625% notes due 2013, 6.50% notes due 2017 and 7.35% notes due 2018 contains restrictions on our ability to create liens, sell assets, enter into sale and leaseback transactions and consolidate or merge. In addition, our credit facility contains covenants that place restrictions on our ability to, among other things:
    create liens;
 
    enter into transactions with affiliates;
 
    sell assets;
 
    in the case of some of our subsidiaries, guarantee debt; and
 
    consolidate or merge.
     Our credit facility also requires that we meet certain financial tests and maintain certain financial ratios, including a maximum debt to capitalization and interest coverage ratios.
     Other agreements that we may enter into in the future may contain covenants imposing significant restrictions on our business that are similar to, or in addition to, the covenants under our existing agreements. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.
     Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of any of these restrictions could result in a default under the indenture governing the notes or under our other debt agreements. An event of default under our debt agreements would permit some of our lenders to declare all amounts borrowed from them to be due and payable, together with accrued and unpaid interest. If we were unable to repay debt to our secured lenders or if we incur secured debt in the future, these lenders could proceed against the collateral securing that debt. In addition, acceleration of our other indebtedness may cause us to be unable to make interest payments on the notes.

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FLUCTUATIONS IN THE VALUE OF THE U.S. DOLLAR RELATIVE TO OTHER CURRENCIES MAY ADVERSELY AFFECT OUR BUSINESS.
     Fluctuations in the value of the dollar can be expected to affect our business. In particular major changes in the rate of exchange of China’s renminbi or the value of the euro to the U.S. dollar could negatively impact our business. A strong U.S. dollar makes imported metal products less expensive, resulting in more imports of steel products into the United States by our foreign competitors while a weak U.S. dollar may have the opposite impact on imports. With the exception of exports of non-ferrous scrap metal by our Americas Recycling segment we have not recently been a significant exporter of metal products from our United States operations. Economic difficulties in some large steel producing regions of the world resulting in lower local demand for steel products have historically encouraged greater steel exports to the United States at depressed prices and can be exacerbated by a strong dollar. As a result, our products which are made in the United States, may become relatively more expensive as compared to imported steel, which has had and in the future could have a negative impact on our sales, revenues, profitability and cash flows.
     A strong U.S. dollar hampers our international marketing and distribution business. Weak local currencies limit the amount of U.S. dollar denominated products that we can import for our international operations and limits our ability to be competitive against local producers selling in local currencies.
OPERATING INTERNATIONALLY CARRIES RISKS AND UNCERTANTIES WHICH COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.
     We have our heaviest concentration of manufacturing facilities in the United States but also have significant facilities in Europe and Australia. Our marketing and trading offices are located in most major markets of the world with our suppliers and our customers located throughout the world. Our marketing and distribution segment relies on substantial international shipments of materials and products in the ordinary course of its business. Our stability, growth and profitability are subject to a number of risks inherent in doing business internationally in addition to the currency exchange risk discussed above, including:
    political, military, terrorist or major pandemic events;
 
    legal and regulatory requirements or limitations imposed by foreign governments (particularly those with significant steel consumption or steel related production including China, Brazil, Russia and India) including quotas, tariffs or other protectionist trade barriers, adverse tax law changes, nationalization or currency restrictions;
 
    disruptions or delays in shipments caused by customs compliance or government agencies; and
 
    potential difficulties in staffing and managing local operations.
WE RELY ON THE AVAILABILITY OF LARGE AMOUNTS OF ELECTRICITY AND NATURAL GAS FOR OUR MINIMILL OPERATIONS. DISRUPTIONS IN DELIVERY OR SUBSTANTIAL INCREASES IN ENERGY COSTS, INCLUDING CRUDE OIL PRICES, COULD ADVERSLY AFFECT OUR FINANCIAL PERFORMANCE.
     Minimills melt steel scrap in electric arc furnaces and use natural gas to heat steel billets for rolling into finished products. As large consumers of electricity and gas, often the largest in the geographic area where our minimills are located, we must have dependable delivery of electricity and natural gas in order to operate. Accordingly, we are at risk in the event of an energy disruption. Prolonged black-outs or brown-outs or disruptions caused by natural disasters such as hurricanes or by political considerations would substantially disrupt our production. While we have not suffered prolonged production delays due to our inability to access electricity or natural gas several of our competitors have experienced such occurrences. Prolonged substantial increases in energy costs would have an adverse affect on the costs of operating our minimills and would negatively impact our gross margins unless we were able to fully pass through the additional expense. Our finished steel products are typically delivered by truck. Rapid increases in the price of fuel attributable to increases in crude oil prices will have a negative impact on our costs and many of our customers’ financial results which could result in reduced margins and declining demand for our products. Rapid increases in fuel costs may also negatively impact our ability to charter ships for international deliveries at anticipated freight rates thereby decreasing our margins on those transactions or causing our customers to look for alternative sources.

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IF WE LOSE THE SERVICES OF KEY EMPLOYEES WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR OPERATIONS AND MEET OUR STRATEGIC OBJECTIVES.
     Our future success depends, in large part, on the continued service of our officers and other key employees and our ability to continue to attract and retain additional highly qualified personnel. These employees are integral to our success based on their expertise and knowledge of our business and products. We compete for such personnel with other companies including public and private company competitors who may periodically offer more favorable terms of employment. While we have an employment agreement with our Chief Executive Officer, we typically do not have employment agreements with other key employees. The loss or interruption of the services of a number of our key employees would reduce our ability to effectively manage our operations due to the fact that we may not be able to find in a timely manner, appropriate replacement personnel should the need arise.
WE MAY HAVE DIFFICULTY COMPETING WITH COMPANIES THAT HAVE A LOWER COST STRUCTURE OR ACCESS TO GREATER FINANCIAL RESOURCES.
     We compete with regional, national and foreign manufacturers and traders. Consolidation among participants in the steel manufacturing and recycling industries has resulted in fewer competitors but several which are significantly larger. Some of our larger competitors have greater financial resources and more diverse businesses than us. Some of our foreign competitors may be able to pursue business opportunities without regard for the laws and regulations with which we must comply, such as environmental regulations. These companies may have a lower cost structure, more operating flexibility and consequently they may be able to offer better prices and more services than we can. We cannot assure you that we will be able to compete successfully with these companies.
OUR STEEL MINIMILL BUSINESS REQUIRES CONTINUOUS CAPITAL INVESTMENTS THAT WE MAY NOT BE ABLE TO SUSTAIN.
     We must make regular substantial capital investments in our steel minimills to lower production costs and remain competitive. We cannot be certain that we will have sufficient internally generated cash or acceptable external financing to make necessary substantial capital expenditures in the future. The availability of external financing depends on many factors outside of our control, including capital market conditions and the overall performance of the economy. If funding is insufficient, we may be unable to develop or enhance our minimills, take advantage of business opportunities and respond to competitive pressures.
SCRAP AND OTHER SUPPLIES FOR OUR BUSINESSES ARE SUBJECT TO SIGNIFICANT PRICE FLUCTUATIONS, WHICH MAY ADVERSELY AFFECT OUR BUSINESS.
     We depend on ferrous scrap, the primary feedstock for our steel minimills and other supplies such as graphite electrodes and ferroalloys for our steel minimill operations. Although we believe that the supply of scrap is adequate to meet future needs, the price of scrap and other supplies have historically been subject to significant fluctuation. Our future profitability will be adversely affected if we are unable to pass on to our customers increased raw material and supplies costs. We may not be able to adjust our product prices to recover the costs of rapid increases in material prices, especially over the short-term and in our domestic fabrication segment’s fixed price fabrication contracts.
     The raw material used in manufacturing copper tubing is copper scrap, supplemented occasionally by virgin copper ingot. Copper scrap has generally been readily available, and a small portion of our copper scrap comes from our metal recycling yards. However, copper scrap is subject to rapid price fluctuations related to the price and supply of virgin copper. Price increases for high quality copper scrap could adversely affect our business. Our Arkansas mill does not have melting capacity, so it is dependent on an adequate supply of competitively priced used rail. The availability of used rail fluctuates with the pace of railroad abandonments, rail replacement by railroads in the United States and abroad and demand for used rail from other domestic and foreign rail rerolling mills. Price increases for used rail could adversely affect our business.
UNEXPECTED EQUIPMENT FAILURES MAY LEAD TO PRODUCTION CURTAILMENTS OR SHUTDOWNS.
     Interruptions in our production capabilities will adversely affect our production costs, steel available for sales and earnings for the affected period. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions. Our manufacturing processes are dependent upon critical pieces of steel-making equipment, such as our furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers. This equipment

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may, on occasion, be out of service as a result of unanticipated failures. We have experienced and may in the future experience material plant shutdowns or periods of reduced production as a result of such equipment failures.
HEDGING TRANSACTIONS MAY EXPOSE US TO LOSS OR LIMIT OUR POTENTIAL GAINS.
     Our product lines and worldwide operations expose us to risks associated with fluctuations in foreign currency exchange, commodity prices and interest rates. As part of our risk management program, we use financial instruments, including commodity futures or forwards, foreign currency exchange forward contracts and interest rate swaps. While intended to reduce the effects of the fluctuations, these transactions may limit our potential gains or expose us to loss. Should our counterparties to such transactions or the sponsors of the exchanges through which these transactions are offered, such as the London Metal Exchange, fail to honor their obligations due to financial distress we would be exposed to potential losses or the inability to recover anticipated gains from these transactions.
     We enter into the foreign currency exchange forwards as economic hedges of trade commitments or anticipated commitments denominated in currencies other than the functional currency to mitigate the effects of changes in currency rates. Although we do not enter into these instruments for trading purposes or speculation, and although our management believes all of these instruments are economically effective as hedges of underlying physical transactions, these foreign exchange commitments are dependent on timely performance by our counterparties. Their failure to perform could result in our having to close these hedges without the anticipated underlying transaction and could result in losses if foreign currency exchange rates have changed.
WE ARE INVOLVED AND MAY IN THE FUTURE BECOME INVOLVED IN VARIOUS ENVIRONMENTAL MATTERS THAT MAY RESULT IN FINES, PENALTIES OR JUDGMENTS BEING ASSESSED AGAINST US OR LIABILITY IMPOSED UPON US WHICH WE CANNOT PRESENTLY ESTIMATE OR REASONABLY FORESEE AND WHICH MAY HAVE A MATERIAL IMPACT ON OUR EARNINGS AND CASH FLOWS.
     Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, called CERCLA, or similar state statutes, we may have obligations to conduct investigation and remediation activities associated with alleged releases of hazardous substances or to reimburse the EPA (or state agencies as applicable) for such activities and to pay for natural resource damages associated with alleged releases. We have been named a potentially responsible party at several federal and state Superfund sites because the EPA or an equivalent state agency contends that we and other potentially responsible scrap metal suppliers are liable for the cleanup of those sites as a result of having sold scrap metal to unrelated manufacturers for recycling as a raw material in the manufacture of new products. We are involved in litigation or administrative proceedings with regard to several of these sites in which we are contesting, or at the appropriate time may contest, our liability at the sites. In addition, we have received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites.
     Although we are unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with various environmental matters or the effect on our consolidated financial position, we make accruals as warranted. Due to inherent uncertainties, including evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process, the uncertainties involved in litigation and other factors, the amounts we accrue could vary significantly from the amounts we ultimately are required to pay.
WE ARE SUBJECT TO LITIGATION WHICH COULD ADVERSELY AFFECT OUR PROFITABILITY.
     We are involved in various litigation matters, including regulatory proceedings, administrative proceedings, governmental investigations, environmental matters and construction contract disputes. The nature of our operations also expose us to possible litigation claims in the future. Although we make every effort to avoid litigation, these matters are not totally within our control. We will contest these matters vigorously and have made insurance claims where appropriate, but because of the uncertain nature of litigation and coverage decisions, we cannot predict the outcome of these matters. These matters could have a material adverse affect on our financial condition and profitability. Litigation is very costly, and the costs associated with prosecuting and defending litigation matters could have a material adverse effect on our financial condition and profitability. Although we are unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with litigation matters, we make accruals as warranted. However, the amounts that we accrue could vary significantly from the amounts we actually pay, due to inherent uncertainties and the inherent shortcomings of the estimation process, the uncertainties involved in litigation and other factors.
OUR SYSTEM OF INTERNAL CONTROLS MUST BE AUDITED ANNUALLY AND THE OCCURRENCE OF A MATERIAL WEAKNESS MAY NEGATIVELY IMPACT OUR BUSINESS REPUTATION, CREDIT RATINGS AND PARTICIPATION IN CAPITAL MARKETS.
     Under the Sarbanes-Oxley Act management must now assess the design and functioning of our system of financial internal control. Our registered independent accountants must then certify the effectiveness of our internal controls. Discovery and disclosure of a material weakness, by definition may have a material adverse impact on our financial statements. Such an occurrence may discourage certain customers or suppliers from doing business with us, may cause downgrades in our debt ratings leading to higher borrowing costs, and may affect how our stock trades. This may in turn negatively affect our ability to access public debt or equity markets for capital.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
     None.
ITEM 2. PROPERTIES
     Our Texas steel minimill is located on approximately 600 acres of land that we own. Our Texas minimill facilities include several buildings that occupy approximately 747,000 square feet. Our Alabama steel minimill is located on approximately 70 acres of land, and it includes several buildings that occupy approximately 544,000 square feet. We utilize our facilities at the Texas and Alabama steel minimills for manufacturing, storage, office and other related uses. Our South Carolina steel minimill is located on approximately 112 acres of land, and the buildings occupy approximately 706,000 square feet. Our Arkansas steel minimill is located on approximately 137 acres of land, and the buildings occupy approximately 238,000 square feet. Our Arizona steel micro mill is located on approximately 230 acres of land, and the buildings occupy approximately 130,000 square feet. We lease approximately 30 acres of land at the Alabama minimill and all the land at the Arkansas and South Carolina minimills in connection with revenue bond financing or property tax incentives. We may purchase the land at the termination of the leases or earlier for a nominal sum. Howell Metal Company owns approximately 75 acres of land in New Market, Virginia, with buildings occupying approximately 410,000 square feet.
     Our Americas Recycling segment’s plants occupy approximately 819 acres of land that we own in Alabama, Arkansas, Florida, Georgia, Kansas, Louisiana, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee and Texas. The recycling segment’s other scrap metal processing locations are on leased land.
     The facilities of our Americas Fabrication operations utilize approximately 1,337 acres of land, of which we lease approximately 102 acres of land, at various locations in Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Iowa, Louisiana, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia and Juarez, Mexico. Our International Fabrication operations utilize approximately 136,000 square meters of land which is either owned or subject to a perpetual usufruct.
     CMCZ’s steel manufacturing operations are located in Zawiercie in South Central Poland about 40 kilometers from Katowice. CMCZ and subsidiaries lease approximately 98% of the 2 million square meters of land utilized by the principal operations with a small balance owned. The land is leased from the State of Poland under contracts with 99 year durations and are considered to create a right of perpetual usufruct. The leases expire beginning in 2089 through 2100. The principal operations are conducted in buildings having an area of approximately 234,000 square meters. The seven major buildings in use have all been constructed on or after 1974. The real estate is also developed with approximately 133 other buildings including warehouses, administrative offices, workshops, garage, transformer stations, pumping stations, gas stations, boiler houses, gate houses and contains some structures leased to unrelated parties, CMCZ subsidiaries and affiliated companies. Other much smaller tracts of land are leased or owned in nearby communities including those utilized by six affiliated scrap processing facilities.
     CMCS is located on approximately 882,000 square meters at Sisak in Central Croatia, approximately 30 miles southeast of Zagreb. The principal operations are conducted in buildings having an area of approximately 179,000 square meters.
     We own two warehouse buildings which our operations in Australia utilize, one of which is located on leased real estate. We lease the other warehouse facilities located in Australia as well as our Australian headquarters, marketing and administration offices.
     We lease the office space occupied by our corporate headquarters as well as that occupied by all of our marketing and distribution offices.
     The leases on the leased properties described above will expire on various dates and with the exception of the CMCZ leases described above, generally over the next nine years. Several of the leases have renewal options. We have had little difficulty renewing such leases as they expire. We estimate our minimum annual rental obligation for real estate operating leases in effect at August 31, 2009, to be paid during fiscal 2010, to be approximately $24 million. We also lease a portion of the equipment we use in our plants. We estimate our minimum annual rental obligation for equipment operating leases in effect at August 31, 2009, to be paid during fiscal 2010, to be approximately $17 million.

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ITEM 3. LEGAL PROCEEDINGS
     On September 18, 2008, we were served with a class action antitrust lawsuit alleging violations of Section 1 of the Sherman Act, brought by Standard Iron Works of Scranton, Pennsylvania, against nine steel manufacturing companies, including Commercial Metals Company. The lawsuit, filed in the United States District Court for the Northern District of Illinois, alleges that the defendants conspired to fix, raise, maintain and stabilize the price at which steel products were sold in the United States by artificially restricting the supply of such steel products. The lawsuit, which purports to be brought on behalf of a class consisting of all purchasers of steel products directly from the defendants between January 1, 2005 and the present, seeks treble damages and costs, including reasonable attorney fees and pre- and post-judgment interest. Since the filing of this lawsuit, additional plaintiffs have filed class action lawsuits naming the same defendants and containing allegations substantially identical to those of the Standard Iron Works complaint. We believe that the lawsuits are entirely without merit and plan to aggressively defend the actions.
     We have received notices from the EPA or state agencies with similar responsibility that we and numerous other parties are considered potentially responsible parties, or PRPs, and may be obligated under the Comprehensive Environmental Response Compensation and Liability Act of 1980, or CERCLA, or similar state statute to pay for the cost of remedial investigation, feasibility studies and ultimately remediation to correct alleged releases of hazardous substances at ten locations. We may contest our designation as a PRP with regard to certain sites, while at other sites we are participating with other named PRPs in agreements or negotiations that have resulted or that we expect will result in agreements to remediate the sites. The EPA or respective state agency refers to these locations, none of which involve real estate we ever owned or conducted operations upon, as the Sapp Battery Site in Cottondale, Florida, the Interstate Lead Company Site in Leeds, Alabama, the Ross Metals Site in Rossville, Tennessee, the Li Tungsten Site in Glen Cove, New York, the Peak Oil Site in Tampa, Florida, the R&H Oil Site in San Antonio, Texas, the SoGreen/Parramore Site in Tifton, Georgia, the Stoller Site in Jericho, South Carolina, the Jensen Drive site in Houston, Texas, and the Industrial Salvage site in Corpus Christi, Texas. We have periodically received information requests from government environmental agencies with regard to other sites that are apparently under consideration for designation as listed sites under CERCLA or similar state statutes. Often we do not receive any further communication with regard to these sites. We do not know if any of these inquiries will ultimately result in a demand for payment from us.
     The EPA notified us and other alleged PRPs that under Sec. 106 of CERCLA we and the other PRPs could be subject to a maximum fine of $25,000 per day and the imposition of treble damages if we and the other PRPs refuse to clean up the Peak Oil, Sapp Battery, SoGreen/Parramore and Stoller site as ordered by the EPA. We are presently participating in PRP organizations at these sites which are paying for certain site remediation expenses. We do not believe that the EPA will pursue any fines against us if we continue to participate in the PRP groups or if we have adequate defenses to the EPA’s imposition of fines against us in these matters.
     In 1993, the Federal Energy Regulatory Commission entered an order against our wholly-owned subsidiary CMC Oil Company, or CMC Oil, which has been inactive since 1985. As a result of the order, CMC Oil is subject to a judgment which the Federal District Court upheld in 1994 and the Court of Appeals affirmed in 1995. The order found CMC Oil liable for overcharges constituting violations of crude oil reseller regulations from December 1977 to January 1979. The alleged overcharges occurred in connection with our joint venture transactions with RFB Petroleum, Inc. The overcharges total approximately $1,330,000 plus interest calculated from the transaction dates to the date of the District Court judgment under the Department of Energy’s interest rate policy, and with interest thereafter at the rate of 6.48% per annum. Although CMC Oil accrued a liability on its books during 1995, it does not have sufficient assets to satisfy the judgment. No claim has ever been asserted against us as a result of the CMC Oil litigation. We will vigorously defend ourselves if any such claim is asserted.
     We are unable to estimate the ultimate dollar amount of any loss in connection with the above-described legal proceedings, environmental matters, government proceedings, and disputes that could result in additional litigation, some of which may have a material impact on earnings and cash flows for a particular quarter. Management believes that the outcome of the suits and proceedings mentioned, and other miscellaneous litigation and proceedings now pending, will not have a material adverse effect on our business or consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     Not Applicable.

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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PURCHASES OF STOCK
                                 
                    (c) Total   (d) Maximum
                    Number of   Number (or Approximate
                    Shares (or Units)   Dollar Value) of
                    Purchased   Shares (or Units) that
                    As Part of   May Yet Be
                    Publicly   Purchased
    (a) Total Number of   (b) Average   Announced   Under the
    Shares (or Units)   Price Paid   Plans or   Plans or
Period   Purchased   Per Share (or Unit)   Programs   Programs (1)
June 1, 2009 - June 30, 2009
    1,866     $ 15.59             8,259,647 (1)
July 1, 2009 - July 31, 2009
    4,500     $ 17.29             8,259,647 (1)
August 1, 2009 - August 31, 2009
    18,158     $ 17.49             8,259,647 (1)
Total
    24,524     $ 17.31             8,259,647 (1)
 
(1)   Shares available to be purchased under the Company’s Share Repurchase Program publically announced October 31, 2008.

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MARKET AND DIVIDEND INFORMATION
     The table below summarizes the high and low sales prices reported on the New York Stock Exchange for our common stock and the quarterly cash dividends we paid for the past two fiscal years.
PRICE RANGE
OF COMMON STOCK
                         
2009            
FISCAL            
QUARTER   HIGH   LOW   CASH DIVIDENDS
 
1 st
  $ 25.76     $ 6.25     12 cents
2 nd
    14.37       8.50     12 cents
3 rd
    17.53       8.83     12 cents
4 th
    18.54       13.18     12 cents
                         
2008            
FISCAL            
QUARTER   HIGH   LOW   CASH DIVIDENDS
 
1 st
  $ 35.89     $ 27.18     9 cents
2 nd
    33.35       20.85     12 cents
3 rd
    36.98       27.13     12 cents
4 th
    39.80       24.63     12 cents
     Since 1982, our common stock has been listed and traded on the New York Stock Exchange. From 1959 until the NYSE listing in 1982, our common stock was traded on the American Stock Exchange. The number of shareholders of record of our common stock at October 26, 2009, was 4,072.
EQUITY COMPENSATION PLANS
     Information about our equity compensation plans as of August 31, 2009, that were either approved or not approved by our stockholders is as follows:
                         
    A.   B.   C.
                    NUMBER OF SECURITIES
                    REMAINING AVAILABLE FOR FUTURE
    NUMBER OF SECURITIES           ISSUANCE UNDER EQUITY
    TO BE ISSUED   WEIGHTED-AVERAGE   COMPENSATION PLANS
    UPON EXERCISE OF   EXERCISE PRICE OF   (EXCLUDING SECURITIES
    OUTSTANDING OPTIONS,   OUTSTANDING OPTIONS,   REFLECTED IN COLUMN
PLAN CATEGORY   WARRANTS AND RIGHTS   WARRANTS AND RIGHTS   (A))
Equity
                       
Compensation plans approved by security holders
    5,427,552     $ 21.36       2,459,893  
Equity
                       
Compensation plans not approved by security holders
                 
TOTAL
    5,427,552     $ 21.36       2,459,893  

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STOCK PERFORMANCE GRAPH
 
The following graph compares the cumulative total return of our common stock during the five year period beginning September 1, 2004 and ending August 31, 2009 with the Standard & Poor’s 500 Composite Stock Price Index also known as the “S&P 500” and the Standard & Poor’s Steel Industry Group Index also known as the “S&P Steel Group.” Each index assumes $100 invested at the close of trading August 31, 2004, and reinvestment of dividends
 
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Commercial Metals Company, The S&P 500 Index
And The S&P Steel Index
 
(PERFORMANCE GRAPH)
 
                                                             
      8/04     8/05     8/06     8/07     8/08     8/09
Commercial Metals Company
      100.00         172.69         251.09         340.03         310.78         209.08  
S&P 500
      100.00         112.56         122.56         141.11         125.38         102.50  
S&P Steel
      100.00         130.83         224.53         310.76         313.15         185.82  
                                                             


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ITEM 6. SELECTED FINANCIAL DATA
     The table below sets forth a summary of our selected consolidated financial information for the periods indicated. The per share amounts have been adjusted to reflect two-for-one stock splits in the form of stock dividends on our common stock paid May 22, 2006 and January 10, 2005.
FOR THE YEAR ENDED AUGUST 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                         
    2009   2008   2007   2006   2005
Net Sales *
  $ 6,793,396     $ 10,427,378     $ 8,329,016     $ 7,212,152     $ 6,260,338  
Net Earnings
    20,802       231,966       355,431       356,347       285,781  
Diluted Earnings Per Share
    0.18       1.97       2.92       2.89       2.32  
Total Assets
    3,687,556       4,746,371       3,472,663       2,898,868       2,332,922  
Stockholders’ Equity
    1,529,693       1,638,383       1,548,567       1,220,104       899,561  
Long-term Debt
    1,181,740       1,197,533       706,817       322,086       386,741  
Cash Dividends Per Share
    0.48       0.45       0.33       0.17       0.12  
Ratio of Earnings to Fixed Charges
    1.20       4.78       11.16       14.80       12.43  
 
*   Excludes the net sales of a division classified as discontinued operations.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
     This annual report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, with respect to our financial condition, results of operations, cash flows and business, and our expectations or beliefs concerning future events, including net earnings, economic conditions, credit availability, product pricing and demand, currency valuation, production rates, energy expense, interest rates, inventory levels, acquisitions, construction and operation of new facilities and general market conditions. These forward-looking statements can generally be identified by phrases such as we or our management “expects,” “anticipates,” “believes,” “plans to,” “ought,” “could,” “will,” “should,” “likely,” “appears,” “projects,” “forecasts,” “outlook” or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. Variances will occur and some could be materially different from our current opinion. Developments that could impact our expectations include the following:
    absence of global economic recovery or possible recession relapse;
 
    solvency of financial institutions and their ability or willingness to lend;
 
    success or failure of governmental efforts to stimulate the economy including restoring credit availability and confidence in a recovery;
 
    customer non-compliance with contracts;
 
    construction activity;
 
    decisions by governments affecting the level of steel imports, including tariffs and duties;
 
    ability to integrate acquisitions into operations;
 
    litigation claims and settlements;
 
    difficulties or delays in the execution of construction contracts resulting in cost overruns or contract disputes;
 
    unsuccessful implementation of new technology;
 
    metals pricing over which we exert little influence;

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    increased capacity and product availability from competing steel minimills and other steel suppliers including import quantities and pricing;
 
    execution of cost minimization strategies;
 
    court decisions;
 
    industry consolidation or changes in production capacity or utilization;
 
    global factors including political and military uncertainties;
 
    currency fluctuations;
 
    interest rate changes;
 
    scrap metal, energy, insurance and supply prices; and
 
    the pace of overall economic activity, particularly in China.
     See the section entitled “Risk Factors” in this annual report for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this annual report are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, we cannot assure you that the actual results or developments we anticipate will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, we caution prospective investors not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
     This Management’s Discussion and Analysis of Financial Condition and Results of Operation should be read in conjunction with our consolidated financial statements and the accompanying notes contained in this annual report.
     We recycle, manufacture, market and distribute steel and metal products through a network of over 220 locations in the United States and Internationally.
     Our business is organized into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication and Distribution, International Mills and International Fabrication and Distribution. Our domestic and international distribution business activities consist only of physical transactions and not market speculation.
Americas Recycling Operations
     We conduct our recycling operations through metal processing plants located in the states of Alabama, Arkansas, Florida, Georgia, Kansas, Louisiana, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.
Americas Mills Operations
     We conduct our domestic mills operations through a network of:
    steel mills, commonly referred to as “minimills,” that produce reinforcing bar, angles, flats, rounds, fence post sections and other shapes; and
 
    a copper tube minimill. Our copper tube minimill is aggregated with the Company’s steel minimills because it has similar economic characteristics.
Americas Fabrication and Distribution Operations
     We conduct our domestic fabrication operations through a network of:
    steel fabrication and processing plants that bend, weld, cut, fabricate, distribute and place steel, primarily reinforcing bar and angles;
 
    warehouses that sell or rent products for the installation of concrete;

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    plants that produce special sections for floors and support for ceilings and floors;
 
    plants that produce steel fence posts; and
 
    plants that treat steel with heat to strengthen and provide flexibility.
     Additionally, our domestic distribution includes our CMC Dallas Trading division which markets and distributes semi-finished, long and flat steel products into the Americas from a diverse base of international and domestic sources.
International Mills Operations
     International Mills includes our Polish (“CMCZ”) and Croatian (“CMCS”) mills and have been presented as a separate segment because the economic characteristics of the market and the regulatory environment in which our international mills operate is different from our domestic minimills. We conduct our international mill operations through:
    a rolling mill that produces primarily reinforcing bar and high quality merchant products;
 
    a rolling mill that produces primarily wire rod;
 
    our scrap processing facilities that directly support the CMCZ minimill; and
 
    an electric arc furnace based steel pipe manufacturer.
International Fabrication and Distribution Operations
     We conduct our international fabrication operations through four steel fabrication plants in Europe primarily for reinforcing bar and mesh. Additionally, we market and distribute steel, copper and aluminum coil, sheet and tubing, ores, metal concentrates, industrial minerals, ferroalloys and chemicals through our network of marketing and distribution offices, processing facilities and joint ventures internationally. Our customers use these products in a variety of industries.
Critical Accounting Policies and Estimates
     The following are important accounting policies, estimates and assumptions that you should understand as you review our financial statements. We apply these accounting policies and make these estimates and assumptions to prepare financial statements under accounting principles generally accepted in the United States (“GAAP”). Our use of these accounting policies, estimates and assumptions affects our results of operations and our reported amounts of assets and liabilities. Where we have used estimates or assumptions, actual results could differ significantly from our estimates.
      Revenue Recognition and Allowance for Doubtful Accounts We recognize sales when title passes to the customer either when goods are shipped or when they are delivered based on the terms of the sale, there is persuasive evidence of an agreement, the price is fixed or determinable and collectability is reasonably assured. When we estimate that a contract with one of our customers will result in a loss, we accrue the calculated loss as soon as it is probable and estimable. We account for fabrication projects in accordance with Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. We maintain an allowance for doubtful accounts to reflect our estimate of the uncollectability of accounts receivable. These reserves are based on historical trends, current market conditions and customer’s financial condition.
      Contingencies In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and government investigations, including environmental matters. We may incur settlements, fines, penalties or judgments because of some of these matters. While we are unable to estimate precisely the ultimate dollar amount of exposure or loss in connection with these matters, we make accruals as warranted. The amounts we accrue could vary substantially from amounts we pay due to several factors including the following: evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process, and the uncertainties involved in litigation. Accordingly, we cannot always estimate a meaningful range of possible exposure. We believe that we have adequately provided in our consolidated financial statements for the impact of these contingencies. We also believe that the outcomes will not significantly affect the

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long-term results of operations or our financial position. However, they may have a material impact on earnings for a particular quarter.
      Inventory Cost We determine inventory cost for most domestic inventories by the last-in, first-out method, or LIFO. We calculate our LIFO reserve by using quantities and costs at year end and recording the resulting LIFO income or expense in its entirety. Inventory cost for international and remaining inventories is determined by the first-in, first-out method, or FIFO. We record all inventories at the lower of their cost or market value.
      Goodwill We test for impairment of goodwill by estimating the fair value of each reporting unit compared to its carrying value. We use a discounted cash flow model to calculate the fair value of our reporting units. The model includes a number of significant assumptions and estimates regarding future cash flows including discount rates, volumes, prices, capital expenditures and the impact of current market conditions. We perform the goodwill impairment test in the fourth quarter each fiscal year and when changes in circumstances indicate an impairment event may have occurred. We incurred no impairment charges of goodwill for the years ended August 31, 2009, 2008 and 2007.
      Property, Plant and Equipment Our domestic and international mills, fabrication and recycling businesses are capital intensive. We evaluate the value of these assets and other long-lived assets whenever a change in circumstances indicates that their carrying value may not be recoverable. Some of the estimated values for assets that we currently use in our operations are based upon judgments and assumptions of future undiscounted cash flows that the assets will produce. If these assets were for sale, our estimates of their values could be significantly different because of market conditions, specific transaction terms and a buyer’s different viewpoint of future cash flows. Also, we depreciate property, plant and equipment on a straight-line basis over the estimated useful lives of the assets. Depreciable lives are based on our estimate of the assets’ economically useful lives and are evaluated annually. To the extent that an asset’s actual life differs from our estimate, there could be an impact on depreciation expense or a gain/loss on the disposal of the asset in a later period. We expense major maintenance costs as incurred.
      Other Accounting Policies and New Accounting Pronouncements See Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements.
Consolidated Results of Operations
                         
    Year ended August 31,
(in millions except share data)   2009   2008   2007
 
Net sales *
  $ 6,793     $ 10,427     $ 8,329  
Net earnings
    20.8       232.0       355.4  
Per diluted share
    0.18       1.97       2.92  
EBITDA
    275.2       531.4       671.0  
International net sales
    2,978       4,937       3,397  
As % of total sales
    44 %     47 %     41 %
LIFO (income) expense** effect on net earnings
    (208.4 )     209.1       33.3  
Per diluted share
    (1.83 )     1.78       0.27  
 
*   Excludes the net sales of a division classified as discontinued operations.
 
**   Last in, first out inventory valuation method.
In the table above, we have included a financial statement measure that was not derived in accordance with GAAP. We use EBITDA (earnings before interest expense, income taxes, depreciation and amortization) as a non-GAAP performance measure. In calculating EBITDA, we exclude our largest recurring non-cash charge, depreciation and amortization. EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. Tax regulations in international operations add additional complexity. Also, we exclude interest cost in our calculation of EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. We use EBITDA as one guideline to assess our unleveraged performance return on our investments. EBITDA is also the target benchmark for our long-term cash incentive performance plan for management. Reconciliations to net earnings are provided below for the years ended August 31:

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(in millions)   2009   2008   2007
 
Net earnings
  $ 20.8     $ 232.0     $ 355.4  
Interest expense
    77.6       59.5       37.3  
Income taxes
    13.7       104.8       171.0  
Depreciation and amortization*
    163.1       135.1       107.3  
 
EBITDA
  $ 275.2     $ 531.4     $ 671.0  
 
EBITDA from discontinued operations
    2.8       3.2       (3.3 )
 
EBITDA from continuing operations
  $ 272.4     $ 528.2     $ 674.3  
 
 
*   Includes asset impairment charges.
EBITDA does not include interest expense, income taxes and depreciation and amortization. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and our ability to generate revenues. Because we use capital assets, depreciation and amortization are also necessary elements of our costs. Also, the payment of income taxes is a necessary element of our operations. Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, we believe that it is appropriate to consider both net earnings determined under GAAP, as well as EBITDA, to evaluate our performance. Also, we separately analyze any significant fluctuations in interest expense, depreciation and amortization and income taxes.
The following events and performances had a significant financial impact during 2009 as compared to 2008 or are expected to be significant for our future operations:
  1.   Overall, net sales decreased 35% due to a significant reduction in prices and volume.
 
  2.   In response to price declines, demand destruction, and a global liquidity crisis, we recorded the following consolidated expenses during 2009: lower of cost or market inventory adjustments of $127.1 million, other charges relating to contractual noncompliance of $19.3 million, bad debt expense of $33.7 million and severance costs of $12.5 million.
 
  3.   We recorded after-tax LIFO income of $208.4 ($1.83 per diluted share) compared to LIFO expense of $209.1 million ($1.78 per diluted share) in 2008.
 
  4.   Net sales of the Americas Recycling segment decreased significantly during 2009 as a result of weak demand causing a decline in both prices and shipments as well as an adjusted operating loss of $89.6 million.
 
  5.   Net sales of the Americas Mills segment decreased 36% from 2009 due to the decrease in the average selling price and a decline in shipments, while adjusted operating profit increased 27% from 2008 due mainly to pre-tax LIFO income.
 
  6.   Our Americas Fabrication and Distribution segment showed a 12% decrease in sales primarily from a decline in shipments but achieved a $179.4 million increase in adjusted operating profit (loss) over 2008 attributable to pre-tax LIFO income of $125.2 million and margin expansion from the deflation in material costs.
 
  7.   Our International Mills segment reported a decline in net sales and adjusted operating profit (loss) compared to 2008 due primarily from rapidly falling sales prices within weak international steel markets, metal margin compression, mill start-up costs and lower of cost or market inventory adjustments.
 
  8.   Our International Fabrication and Distribution segment incurred an adjusted operating loss of $4.3 million due primarily from reductions in market demand and inventory valuations adjustments caused by declining prices.
 
  9.   Significant construction projects in 2009, which are as follows: caster upgrades at CMCS which were completed in August 2009, micro mill in Arizona with a start-up date of September 2009, new flexible

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      section mill in CMCZ with expected completion in January 2010 and melt shop upgrades at CMCS with expected completion in February 2010.
 
  10.   Expense of $49.1 million and capital expenditures of $29.8 million were recorded during 2009 as compared to expense of $53.7 million and capital expenditures of $49.9 million recorded during 2008 related to the global implementation of SAP. At August 31, 2009, we successfully ended the project phase of our deployment of SAP, returned significant personnel resources back to our operating units, and combined SAP expertise with our IT organization. We will continue the deployment of SAP on a more measured pace and enhance our supply chain management benefits by optimizing the use of the system. As a result, SAP will no longer be reported as a separate project.
 
  11.   We finished winding down the operations of our discontinued operation in 2009 resulting in a slight gain.
Segments
Unless otherwise indicated, all dollars below are before minority interests and income taxes. Financial results for our reportable segments are consistent with the basis and manner in which we internally disaggregate financial information for making operating decisions. See Note 15, Business Segments, to the consolidated financial statements.
We use adjusted operating profit (loss) to compare and evaluate the financial performance of our segments. Adjusted operating profit (loss) is the sum of our earnings (loss) before income taxes and financing costs. Adjusted operating profit (loss) is equal to earnings (loss) before income taxes for Americas Mills and Americas Fabrication and Distribution segments because these segments require minimal outside financing.
The following table shows net sales and adjusted operating profit (loss) by business segment:
                         
    Year ended August 31,
(in millions)   2009   2008   2007
 
Net sales:
                       
Americas Recycling
  $ 785     $ 2,189     $ 1,801  
Americas Mills
    1,253       1,966       1,540  
Americas Fabrication and Distribution
    2,528       2,875       2,587  
International Mills
    682       1,156       777  
International Fabrication and Distribution
    2,516       3,781       2,762  
Corporate
    (11 )     (2 )     11  
Eliminations/Discontinued operations
    (960 )     (1,538 )     (1,149 )
Adjusted operating profit (loss):
                       
Americas Recycling
    (89.6 )     145.8       113.0  
Americas Mills
    263.4       207.8       259.4  
Americas Fabrication and Distribution
    111.6       (67.5 )     100.0  
International Mills
    (77.4 )     96.8       112.4  
International Fabrication and Distribution
    (4.3 )     124.3       73.7  
Corporate
    (94.8 )     (99.5 )     (72.0 )
Eliminations
    7.5       0.1       (7.6 )
LIFO Impact on Adjusted Operating Profit (Loss) LIFO is an inventory costing method that assumes the most recent inventory purchases or goods manufactured are sold first. This results in current sales prices offset against current inventory costs. In periods of rising prices it has the effect of eliminating inflationary profits from net income. In periods of declining prices it has the effect of eliminating deflationary losses from net income. In either case the goal is to reflect economic profit. The table below reflects LIFO income or (expense) representing decreases or (increases) in the LIFO inventory reserve. International Mills is not included in this table as it uses FIFO valuation exclusively for its inventory:

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    Three Months Ended   Twelve Months Ended
    August 31,   August 31,
(in thousands)   2009   2008   2009   2008
 
Americas Recycling
  $ (8,253 )   $ 5,094     $ 27,049     $ (16,894 )
Americas Mills
    (8,713 )     (40,152 )     135,541       (109,809 )
Americas Fabrication and Distribution
    52,007       (100,945 )     125,152       (197,435 )
International Fabrication and Distribution*
    2,478       (3,893 )     32,853       2,398  
 
Consolidated increase (decrease) to adjusted profit (loss) before tax
  $ 37,519     $ (139,896 )   $ 320,595     $ (321,740 )
 
 
*   LIFO income or (expense) includes a division classified as discontinued operations.
2009 Compared to 2008
Americas Recycling During 2009, this segment experienced a decline in scrap prices and market demand resulting in reduced net sales and an adjusted operating loss as compared to 2008, a year with record operating results. The decline in gross margins for ferrous and nonferrous was almost evenly attributable to both volume and prices as compared to 2008. The decrease in margins was partially offset by a swing of $43.9 million in LIFO income due to declining prices during 2009. Ferrous and nonferrous pricing reversed the declining trends of the opening six months of fiscal 2009. We exported 11% of our ferrous scrap and 25% of our nonferrous scrap during the year.
     The following table reflects our Americas Recycling segment’s average selling prices per ton and tons shipped (in thousands) for the year ended August 31:
                                 
                    Decrease
    2009   2008   Amount   %
 
Average ferrous selling price
  $ 181     $ 346     $ (165 )     (48 %)
Average nonferrous selling price
  $ 1,824     $ 3,037     $ (1,213 )     (40 %)
Ferrous tons shipped
    1,817       3,053       (1,236 )     (40 %)
Nonferrous tons shipped
    203       305       (102 )     (33 %)
Total volume processed and shipped
    2,033       3,391       (1,358 )     (40 %)
      Americas Mills We include our four domestic steel minimills and our copper tube minimill in our Americas Mills segment. While this segment had a decrease in net sales during 2009 as compared to 2008, adjusted operating profit increased due to LIFO income recorded in 2009 as compared to LIFO expense recorded in 2008.
     Within the segment, adjusted operating profit for our four domestic steel minimills was $239.6 million for 2009 as compared to $195.3 million for 2008. Metal margins increased over 2008 primarily due to rapidly declining ferrous scrap prices in excess of selling prices and a swing in LIFO income of $223.0 million. Tons shipped declined as compared to 2008, but were rising late in fiscal 2009 as a result of restocking, seasonal demand and continued public sector projects. Our mills ran at 60% utilization during 2009 as compared to 89% during 2008. We rolled 30% fewer tons in 2009 as compared to 2008 to meet lagging demand. Rebar accounted for 58% of tonnage shipped, an increase from 45% in 2008. The price premium of merchant bar over reinforcing bar averaged $206 per ton, up $86 per ton from 2008. Lower production rates as well as price decreases in some alloys and natural gas rates resulted in an overall decrease of $76.4 million in electrode, alloys and energy costs. During the fourth quarter of 2009, we completed construction of our new micro mill in Arizona and in September of 2009 began start-up operations.
     The table below reflects steel and ferrous scrap prices per ton for the year ended August 31:
                                 
                    Increase (Decrease)
    2009   2008   Amount   %
 
Average mill selling price (finished goods)
  $ 662     $ 723     $ (61 )     (8 %)
Average mill selling price (total sales)
    642       691       (49 )     (7 %)
Average cost of ferrous scrap consumed
    254       350       (96 )     (27 %)
Average FIFO metal margin
    388       341       47       14 %
Average ferrous scrap purchase price
    195       329       (134 )     (41 )%

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     The table below reflects our steel minimills’ operating statistics (short tons in thousands) for the year ended August 31:
                                 
                    Decrease
    2009   2008   Amount   %
 
Tons melted
    1,599       2,396       (797 )     (33 %)
Tons rolled
    1,478       2,101       (623 )     (30 %)
Tons shipped
    1,736       2,528       (792 )     (31 %)
     Our copper tube minimill’s adjusted operating profit increased $11.3 million to $23.8 million in 2009 as compared to 2008 primarily due to an increase in LIFO income for 2009 of $22.3 million. Continued weakness remains in residential housing while demand is primarily from public projects and healthcare.
     The table below reflects our copper tube minimill’s prices per pound and operating statistics for the year ended August 31:
                                 
                    Decrease
(pounds in millions)   2009   2008   Amount   %
 
Pounds shipped
    48.2       52.3       (4.1 )     (8 %)
Pounds produced
    45.5       46.8       (1.3 )     (3 %)
Average copper selling price
  $ 2.90     $ 4.34     $ (1.44 )     (33 %)
Average copper scrap production cost
  $ 1.89     $ 3.22     $ (1.33 )     (41 %)
Average copper metal margin
  $ 1.01     $ 1.12     $ (0.11 )     (10 %)
Average copper scrap purchase price
  $ 2.07     $ 3.38     $ (1.31 )     (39 %)
      Americas Fabrication and Distribution During 2009, rebar, structural, decking, and construction services were profitable while post and joist and the domestic steel import and distribution operations incurred losses. Profits were attributable to margin improvements on lower material costs supplying relatively high-priced backlog shipments as compared to 2008 which included rising prices and margin compression for our fabrication business. As the economic conditions continued to deteriorate during 2009, the prices and the volume associated with the backlog decreased leading to lower sales and shipments during the end of fiscal 2009. Losses in post operations were caused by high-priced raw material in inventory running through production and strong competition for dwindling tons in joist operations. The composite average fabrication selling price was $1,131 per ton, up from $1,064 per ton in 2008. Rebar shipments have been positively impacted by recent acquisitions of CMC Coating and CMC Regional Steel. Our largest challenge for this segment remains in our domestic steel import and distribution business which incurred substantial losses. The decline in spot pricing coupled with customer liquidity issues has led to unprecedented and unwarranted contract cancellations, market claims, price negotiations and unanticipated inventory positions resulting in charges of $48.4 million in 2009.
     The tables below shows our average fabrication selling prices per short ton and total fabrication plant shipments for the year ended August 31:
                                 
                    Increase
Average selling price*   2009   2008   Amount   %
 
Rebar
  $ 980     $ 909     $ 71       8 %
Joist
    1,464       1,309       155       12 %
Structural
    3,037       2,697       340       13 %
Post
    956       834       122       15 %
Deck
    1,524       1,324       200       15 %
 
* Excludes stock and buyout sales.

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                    Decrease
Tons shipped (in thousands)   2009   2008   Amount   %
 
Rebar
    1,010       1,061       (51 )     (5 %)
Joist
    153       244       (91 )     (37 %)
Structural
    70       90       (20 )     (22 %)
Post
    69       106       (37 )     (35 %)
Deck
    122       225       (103 )     (46 %)
      International Mills Weak international steel markets, metal margin compression, mill start-up costs and lower of cost or market inventory adjustments caused by rapidly falling sales prices resulted in an adjusted operating loss for this segment in 2009. CMC Zawiercie (“CMCZ”) had an adjusted operating loss of $39.5 million in 2009 compared to an adjusted operating profit of $122.1 million in 2008 primarily due to compressed metal margins combined with a 12% decline in volume. Shipments included 241 thousand tons of billets compared to 373 thousand tons of billets in the prior year. We successfully rolled 22 thousand tons of material on our newly commissioned wire rod block and we will continue to test different sizes and grades incurring additional start-up costs in the first quarter of fiscal year 2010. This major strategic expansion captures the advantage of the underutilized melting capacity of CMCZ’s two existing electric arc furnaces.
     The table below reflects CMCZ’s operating statistics (in thousands) and average prices per short ton:
                                 
                    Decrease
    2009   2008   Amount   %
 
Tons melted
    1,269       1,502       (233 )     (16 %)
Tons rolled
    997       1,100       (103 )     (9 %)
Tons shipped
    1,258       1,434       (176 )     (12 %)
Average mill selling price (total sales)
  1,351  PLN   1,698  PLN   (347 ) PLN      (20 %)
Averaged cost of ferrous scrap production cost
  785  PLN   1,039  PLN   (254 ) PLN      (24 %)
Average metal margin
  566  PLN   659  PLN   (93 ) PLN      (14 %)
Average ferrous scrap purchase price
  613  PLN   905  PLN   (292 ) PLN      (32 %)
Average mill selling price (total sales)
  $ 457     $ 744     $ (287 )     (39 %)
Average cost of ferrous scrap production cost
  $ 255     $ 441     $ (186 )     (42 %)
Average metal margin
  $ 202     $ 303     $ (101 )     (33 %)
Average ferrous scrap purchase price
  $ 202     $ 396     $ (194 )     (49 %)
 
PLN - Polish zlotys
     CMCS reported an adjusted operating loss of $37.9 million during 2009 as compared to an adjusted operating loss of $25.3 million during 2008. The decline is primarily due to decreased demand including the collapse of energy markets, increased Chinese competition in the North Africa and Middle East markets and inventory valuation adjustments. CMCS melted 49 thousand tons, rolled 63 thousand tons and shipped 67 thousand tons during 2009 as compared to 34 thousand tons melted, 67 thousand tons rolled and 58 thousand tons shipped during 2008. Our yields have steadily improved during 2009, and we have successfully completed castings of all major sizes of billets from phase one of our upgraded melt shop. The installation of the renovated furnace is underway and should be completed during the second quarter of fiscal year 2010. The turnaround at CMCS is contingent on the successful completion of our capital expenditure programs for a replacement furnace, improvements to the continuous caster and increased sales as part of a market turnaround.
      International Fabrication and Distribution This segment’s net sales decreased and we incurred an adjusted operating loss during 2009 driven by reduced market demand and inventory valuation adjustments as pricing fell during 2009 offset by pre-tax LIFO income primarily related to a division classified as a discontinued operation. The downturn in steel markets continues in Europe while parts of Asia and Australia are showing signs of recovery. The global financial crisis contributed to customer noncompliance with contracts, market claims and price renegotiations. Additionally, demand was negatively impacted as customers were not willing to be exposed to lead times for imported material in the volatile pricing environment. This segment recorded over $100 million in charges for inventory adjustments and customer non-compliance during 2009. Our raw materials import business remained profitable and we opened a fabrication facility in Zyrardow, Poland, located west of Warsaw.

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     In August 2007, CMC’s Board approved a plan to offer for sale a division which was involved with the buying, selling and distribution of nonferrous metals. At August 31, 2009, in connection with the closure of the division, all inventory of this division had been sold or absorbed by other divisions of the Company. See Note 5, Discontinued Operations, to the consolidated financial statements.
      Corporate Our corporate expenses decreased $4.7 million in 2009 to $94.8 million primarily due to reductions in bonus and profit sharing expenses and costs incurred for the global installation of SAP software which were offset by increased salary and severance expense.
      Discontinued Operations Adjusted operating profit for our division classified as a discontinued operation decreased to $2.6 million from adjusted operating profit of $2.9 million in 2008. The change primarily resulted from an increase in LIFO income of $24.0 million as compared to 2008 offset by costs incurred with ceasing operations.
      Consolidated Data On a consolidated basis, the LIFO method of inventory valuation increased our net earnings by $208.4 million ($1.83 per diluted share) for 2009 as compared to decreasing our net earnings by $209.1 million ($1.78 diluted share) for 2008. Our overall selling, general and administrative (“SG&A”) expenses decreased by $36.6 million (5%) for 2009 as compared to 2008. SG&A expense primarily declined due to decreased bonus and profit sharing expenses and cost incurred for the global installation of SAP software partially offset by increased salary expense because of company growth, including recent acquisitions, increased bad debt expense and severance expense.
     Our interest expense increased by $18.7 million to $77.0 million during 2009 as compared to 2008 primarily due to the issuance of $500 million in senior unsecured notes in August 2008 and increased debt outstanding internationally during the current fiscal year which was offset in part by the repayment of $100 million senior unsecured notes in February 2009.
     Our effective tax rate for the year ended August 31, 2009 increased to 40.3% as compared to 31.1% in 2008. Our effective tax rate for 2009 varies from our statutory rate due to lower tax rate jurisdictions (predominately international) incurring losses and higher rate jurisdictions generating income. As of August 31, 2009, it is our intention to indefinitely reinvest earnings of non-U.S. subsidiaries. As a result, the deferred income tax liability relating to prior periods has been reversed positively impacting our effective tax rate for 2009.
Outlook
     We believe fiscal 2010 will be a year of two contrasting halves; we expect (i) the first half of the year will suffer the lingering effects of the down economy and the downturn during the winter season and (ii) the second half of the year should benefit from an improving economy and the traditional increase from the spring construction season. Domestic market conditions appear to be stabilizing, but at modest levels. The U.S. stimulus programs are likely to become effective in calendar year 2010. Private nonresidential construction is likely to remain weak. The Asian markets are the most encouraging. China continues to fund steel intensive projects including infrastructure, public housing and energy plans. China may curb new steel production to control excess steel capacity. China may increase exports of higher value steel products, but we believe this will be mainly to nearby Asian markets. We believe most markets in Asia are likely to continue to improve including Taiwan, Vietnam and Malaysia. Australia’s economic recovery is ahead of the U.S., and we believe recovery in Europe is likely to be mixed. Poland is expected to lead Central Eastern Europe with improving GDP growth.
2008 Compared to 2007
      Americas Recycling This segment had record sales and adjusted operating profit in 2008 which was driven by higher scrap prices, primarily ferrous. The record adjusted operating income of $145.8 million was strong enough to overcome LIFO expense of $16.9 million in 2008 compared to $0.4 million in 2007. Spurred by ferrous price increases, our ferrous scrap operations accounted for three-fourths of the segment’s profitability. The average ferrous scrap sales price increased 56% and shipments increased 7% compared to 2007. Although lower than ferrous scrap, the average sales price of nonferrous scrap increased 4% but shipments decreased 13% due to continued weak residential markets and lower manufacturing output. We exported 31% of our nonferrous scrap during the year.

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     The following table reflects our Americas Recycling segment’s average selling prices per short ton and tons shipped (in thousands) for the year ended August 31:
                                 
                    Increase (Decrease)
    2008   2007   Amount   %
 
Average ferrous selling price
  $ 346     $ 222     $ 124       56 %
Average nonferrous selling price
  $ 3,037     $ 2,920     $ 117       4 %
Ferrous tons shipped
    3,053       2,842       211       7 %
Nonferrous tons shipped
    305       350       (45 )     (13 %)
Total volume processed and shipped
    3,391       3,220       171       5 %
      Americas Mills We include our four domestic steel minimills and our copper tube minimill in our Americas Mills segment. While 2008 resulted in record sales for this segment, adjusted operating profit decreased 20% from 2007 resulting from a significant increase in LIFO expense due to spiking ferrous scrap prices. This segment had LIFO expense of $109.8 million, an increase of $82.5 million over 2007.
     Within the segment, adjusted operating profit for our four domestic steel minimills was $195.3 million for 2008 as compared to $239.8 million for 2007. The decrease in adjusted operating profit was mainly due to additional LIFO expense of $102.1 million recorded during 2008 as compared to 2007. Metal margins were 2% higher as weighted average sales prices barely stayed ahead of rapidly increasing ferrous scrap prices. The price of ferrous scrap consumed rose 50% compared to 2007. The increase in ferrous scrap prices drove the average selling price up $125 per ton while the average selling price for finished goods increased $136 per ton. Margins were negatively impacted by a 77% increase in alloys and electrodes and a 31% increase in energy cost during 2008 as compared to 2007. Combined, these two costs accounted for an increase of $65 million. Sales volumes increased 12% to 2.5 million tons, an all-time record, while tonnage rolled increased 7% to 2.1 million tons. We have invested $63 million for our micro mill project in Arizona.
     The table below reflects steel and ferrous scrap prices per ton for the year ended August 31:
                                 
                    Increase
    2008   2007   Amount   %
 
Average mill selling price (finished goods)
  $ 723     $ 587     $ 136       23 %
Average mill selling price (total sales)
    691       566       125       22 %
Average cost of ferrous scrap consumed
    350       233       117       50 %
Average FIFO metal margin
    341       333       8       2 %
Average ferrous scrap purchase price
    329       211       118       56 %
     The table below reflects our steel minimills’ operating statistics (short tons in thousands) for the year ended August 31:
                                 
                    Increase
    2008   2007   Amount   %
 
Tons melted
    2,396       2,121       275       13 %
Tons rolled
    2,101       1,957       144       7 %
Tons shipped
    2,528       2,250       278       12 %
     Our copper tube minimill experienced continued strength from commercial markets while residential markets remained weak. Adjusted operating profit decreased 36% to $12.5 million primarily due to an increase in LIFO expense for 2008 of $7.7 million. Pounds shipped, including sales of steel pipe, a new product line in 2008, remained flat as compared to 2007. The average copper selling price increased 7% to $4.34 per pound and the metal margin increased 5% to $1.12 per pound overcoming average copper scrap purchase price increases of $0.29 to $3.38 per pound. The decline in the residential housing market coupled with the extraordinary high price of copper has reduced the demand for copper plumbing tube across the U.S.

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     The table below reflects our copper tube minimill’s prices per pound and operating statistics for the year ended August 31:
                                 
                    Increase (Decrease)
(pounds in millions)   2008   2007   Amount   %
 
Pounds shipped
    52.3       52.5       (0.2 )      
Pounds produced
    46.8       50.4       (3.6 )     (7 %)
Average copper selling price
  $ 4.34     $ 4.06     $ 0.28       7 %
Average copper scrap production cost
  $ 3.22     $ 2.99     $ 0.23       8 %
Average copper metal margin
  $ 1.12     $ 1.07     $ 0.05       5 %
Average copper scrap purchase price
  $ 3.38     $ 3.09     $ 0.29       9 %
      Americas Fabrication and Distribution During 2008, this segment reported adjusted operating loss of $67.5 million as compared to adjusted operating income of $100.0 million in the prior year due primarily to rapidly increasing prices which caused massive LIFO charges and margin compression on fixed price contracts. LIFO expense was $197.4 million for 2008 as compared to $11.5 million in the prior year. We also recorded job loss reserves of $26.7 million during 2008 based on our estimate of fixed rate contracts. The composite average selling price increased 13%, however, the overall job mix represented by the backlog did not have sufficient time to rollover to higher prices to match the increase in steel finished goods. These negative results were offset by an $8.6 million litigation settlement we received during the third quarter of 2008 related to costs incurred on a large structural fabrication job in an operating unit we sold several years ago. Driven by pipe, tubular goods and merchant products, our domestic distribution operation had excellent sales volumes and profits during 2008.
     The tables below shows our average fabrication selling prices per short ton and total fabrication plant shipments for the year ended August 31:
                                 
                    Increase
Average selling price*   2008   2007   Amount   %
 
Rebar
  $ 909     $ 831     $ 78       9 %
Joist
    1,309       1,184       125       11 %
Structural
    2,697       2,364       333       14 %
Post
    834       720       114       16 %
Deck
    1,324       N/A **     N/A       N/A  
 
*   Excludes stock and buyout sales.
 
**   Average sales price not presented as deck operation represents minimal activity during 2007.
                                 
                    Increase (Decrease)
Tons shipped (in thousands)   2008   2007   Amount   %
 
Rebar
    1,061       1,014       47       5 %
Joist
    244       340       (96 )     (28 %)
Structural
    90       84       6       7 %
Post
    106       103       3       3 %
Deck
    225       54       171       317 %
      International Mills Net sales for 2008 increased 49%, impacted by favorable foreign exchange rates which resulted in an increase in net sales of approximately 19%. Adjusted operating profit for 2008 decreased 14% mainly due to continued start-up costs at our CMCS mill which was acquired in the first quarter of 2008. During 2008, adjusted operating profit at our mill in Poland increased 8.6% to $122.1 million. Average mill selling price increased 8% and the average ferrous scrap production cost increased 19% resulting in a decrease in the average metal margin of 6% to 659 PLN.

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     The table below reflects CMCZ’s operating statistics (in thousands) and average prices per short ton:
                                 
                    Increase (Decrease)
    2008   2007   Amount   %
 
Tons melted
    1,502       1,458       44       3 %
Tons rolled
    1,100       1,130       (30 )     (3 %)
Tons shipped
    1,434       1,366       68       5 %
Average mill selling price (total sales)
  1,698  PLN   1,575  PLN     123       8 %
Averaged cost of ferrous scrap production cost
  1,039  PLN   876  PLN     163       19 %
Average metal margin
  659  PLN   699  PLN     (40 )     (6 %)
Average ferrous scrap purchase price
  905  PLN   780  PLN     125       16 %
Average mill selling price (total sales)
  $ 744     $ 542     $ 202       37 %
Average cost of ferrous scrap production cost
  $ 441     $ 302     $ 139       46 %
Average metal margin
  $ 303     $ 240     $ 63       26 %
Average ferrous scrap purchase price
  $ 396     $ 268     $ 128       48 %
 
PLN - Polish zlotys
     CMCS reported an adjusted operating loss of $25.3 million during 2008 due to start-up costs and regaining customer acceptance. During 2008, CMCS melted 34 thousand tons, rolled 67 thousand tons and shipped 58 thousand tons.
      International Fabrication and Distribution Net sales for 2008 increased 37%, impacted by favorable foreign exchange rates which resulted in an increase in net sales of approximately 5%. Adjusted operating income increased 69% to $124.3 million, this segment’s all-time record, driven by strong pricing in the Middle East, North Africa, and Central Europe, and with the German economy growing at its fastest rate in a decade. Our Australian operations performed well as the domestic economy remains strong and commodity prices remain high. Our raw materials division set a record for sales and operating profit in 2008. With China reducing export tonnages, prices in Southeast Asia have risen and profits in inter-Asian trade remained positive.
      Corporate Our corporate expenses for 2008 increased $27.5 million over the prior year due primarily to an increase of $19.9 million in costs incurred for our investment in the global installation of SAP software.
      Discontinued Operations Adjusted operating profit for our division classified as a discontinued operation increased to $2.9 million from adjusted operating loss of $3.5 million in 2007. The change primarily resulted from LIFO income of $2.4 million recorded in 2008 as compared to expense of $12.0 million during 2007.
      Consolidated Data On a consolidated basis, the LIFO method of inventory valuation decreased our net earnings by $209.1 million and $33.3 million ($1.78 and $0.27 per diluted share) for 2008 and 2007, respectively. Our overall selling, general and administrative (“SG&A”) expenses increased by $124.0 million (21%) for 2008 as compared to 2007. SG&A expense in 2008 includes $53.7 million expense associated with our investment in the global deployment of SAP software. In addition, salaries and discretionary incentive compensation increased because of company growth, including acquisitions.
     Our interest expense increased by $21.9 million during 2008 as compared to 2007 primarily due to the issuance of $500 million in senior unsecured notes in August 2008, the issuance of $400 million in unsecured notes in July 2007 and increased debt outstanding internationally during 2008.
     Our effective tax rate for the year ended August 31, 2008 decreased to 31.1% as compared to 31.9% in 2007 due to shifts in profitability among tax jurisdictions.
2009 Liquidity and Capital Resources
     See Note 6, Credit Arrangements, to the consolidated financial statements.
     We believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities. However, we could be adversely affected if our banks, the buyers of our commercial paper or other of the traditional sources supplying our short term borrowing requirements refuse to honor their contract commitments, cease lending or declare bankruptcy. While we believe the lending institutions participating in our

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credit arrangements are financially capable, recent events in the global credit markets, including the failure, takeover or rescue by various government entities of major financial institutions, have created uncertainty of credit availability to an extent not experienced in recent decades.
     Our sources, facilities and availability of liquidity and capital resources as of August 31, 2009 (dollars in thousands):
                 
    Total Facility   Availability
Cash and cash equivalents
  $ 405,603     $ N/A  
Net cash flows from operating activities
    806,536       N/A  
Commercial paper program*
    400,000       372,100  
Domestic accounts receivable securitization
    100,000       100,000  
International accounts receivable sales facilities
    198,746       105,049  
Bank credit facilities – uncommitted
    1,082,170       808,037  
Notes due from 2013 to 2018
    1,204,945       **  
Trade financing arrangements
    **       As required
Equipment notes
    9,597        
 
*   The commercial paper program is supported by our $400 million unsecured revolving credit agreement. The availability under the revolving credit agreement is reduced by $27.9 million of stand-by letters of credit issued as of August 31, 2009. The revolving credit agreement matures on May 23, 2010 and the Company intends to renegotiate and extend the facility during fiscal year 2010.
 
**   With our investment grade credit ratings we believe we have access to additional financing and refinancing, if needed.
     Certain of our financing agreements include various financial covenants. Our revolving credit agreement requires compliance with certain covenants each fiscal quarter, of which we were in compliance as of August 31, 2009. The CMCZ notes require compliance with certain covenants each February and August. At August 31, 2009, CMCZ was not in compliance with these covenants which resulted in a guarantee by Commercial Metals Company becoming effective. As a result of the guarantee, the financial covenant requirements became void, however, all other terms of the loan remain in effect, including the payment schedule. The guarantee will cease to be effective when CMCZ is in compliance with the financial covenants for two consecutive quarters.
      Off-Balance Sheet Arrangements For added flexibility, we may secure financing through securitization and sales of certain accounts receivable both in the U.S. and Internationally. See Note 3, Sales of Accounts Receivable, to the consolidated financial statements. We may sell accounts receivable on an ongoing basis to replace those receivables that have been collected from our customers. Our domestic securitization program contains certain cross-default provisions whereby a termination event could occur should we default under another credit arrangement, and contains covenants that conform to the same requirements contained in our revolving credit agreement.
      Cash Flows Our cash flows from operating activities primarily result from sales of steel and related products, and to a lesser extent, sales of nonferrous metal products. We also sell and rent construction-related products and accessories. We have a diverse and generally stable customer base. We use futures or forward contracts as needed to mitigate the risks from fluctuations in foreign currency exchange rates and metals commodity prices. See Note 7, Financial Instruments, Market and Credit Risk, to the consolidated financial statements.
     During 2009, we generated $806.5 million of net cash flows from operating activities as compared to using $43.5 million in 2008. Significant fluctuations in working capital were as follows:
    decreased accounts receivable – decreased sales and prices during 2009;
 
    decreased inventories – decreased inventory on hand and lower inventory costs; and
 
    decreased accounts payable and accrued expenses – more cash being used during 2009 as current liabilities increased at the end of 2008 as a result of higher volume. Lower volume in 2009 led to less purchasing of material and reduced accounts payable. Additionally, accrued expenses were reduced as a result of minimal amounts accrued for bonus and profit sharing during 2009.
     During 2009, we used $368.0 million of net cash flows from investing activities as compared to $581.8 million in 2008. We had no significant acquisitions in 2009 which resulted in a decrease in cash used for acquisitions of $227.5

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million. During 2009, we invested $369.7 million in property, plant and equipment. Significant capital expenditures in 2009 related to construction of the new micro mill in Arizona, the installation of a new wire rod block and rolling mill at CMCZ, the melt shop and caster upgrades at CMCS and capitalization of costs associated with the global implementation of SAP.
     We expect our total capital spending for 2010 to be approximately $150 million. We continually assess our capital spending and reevaluate our requirements based on current and expected results.
     Net cash flows from financing activities used $246.5 million for 2009 as compared to cash provided of $423.8 million for 2008. The increase in cash used was primarily due to net repayments of short term borrowings and long-term debt during 2009 of $94.7 million as compared to net proceeds in 2008 of $589.2 million from new debt issued. During 2009, we used $18.5 million to purchase 1.8 million shares of our common stock as part of our stock repurchase program, a decrease of $153.8 million as compared to 2008. Additionally, we decreased documentary letters of credit which resulted in a change in the use of cash of $122.3 million as compared to 2008.
     Our contractual obligations for the next twelve months of $907 million are typically expenditures with normal revenue producing activities. We believe our cash flows from operating activities and debt facilities are adequate to fund our ongoing operations and planned capital expenditures.
Contractual Obligations
The following table represents our contractual obligations as of August 31, 2009 (dollars in thousands):
                                         
    Payments Due By Period*
            Less than                   More than
Contractual Obligations:   Total   1 Year   1-3 Years   3-5 Years   5 Years
 
Long-term debt(1)
  $ 1,214,542     $ 32,802     $ 59,310     $ 222,381     $ 900,049  
Notes payable
    1,759       1,759                    
Interest(2)
    594,038       79,787       154,288       139,741       220,222  
Operating leases(3)
    172,235       40,930       62,866       37,607       30,832  
Purchase obligations(4)
    904,765       751,956       81,396       50,362       21,051  
 
Total contractual cash obligations
  $ 2,887,339     $ 907,234     $ 357,860     $ 450,091     $ 1,172,154  
     
 
*   We have not discounted the cash obligations in this table.
 
(1)   Total amounts are included in the August 31, 2009 consolidated balance sheet. See Note 6, Credit Arrangements, to the consolidated financial statements.
 
(2)   Interest payments related to our short-term debt are not included in the table as they do not represent a significant obligation as of August 31, 2009.
 
(3)   Includes minimum lease payment obligations for non-cancelable equipment and real-estate leases in effect as of August 31, 2009. See Note 12, Commitments and Contingencies, to the consolidated financial statements.
 
(4)   Approximately 79% of these purchase obligations are for inventory items to be sold in the ordinary course of business. Purchase obligations include all enforceable, legally binding agreements to purchase goods or services that specify all significant terms, regardless of the duration of the agreement. Agreements with variable terms are excluded because we are unable to estimate the minimum amounts. Another significant obligation relates to capital expenditures.
Other Commercial Commitments
     We maintain stand-by letters of credit to provide support for certain transactions that our insurance providers and suppliers request. At August 31, 2009, we had committed $31.8 million under these arrangements. All commitments expire within one year.
Contingencies
     In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and government investigations, including environmental matters. We may incur settlements, fines, penalties or

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judgments because of some of these matters. While we are unable to estimate precisely the ultimate dollar amount of exposure or loss in connection with these matters, we make accruals as warranted. The amounts we accrue could vary substantially from amounts we pay due to several factors including the following: evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process, and the uncertainties involved in litigation. Accordingly, we cannot always estimate a meaningful range of possible exposure. We believe that we have adequately provided in our consolidated financial statements for the impact of these contingencies. We also believe that the outcomes will not significantly affect the long-term results of operations or our financial position. However, they may have a material impact on earnings for a particular quarter.
Environmental and Other Matters
     See Note 12, Commitments and Contingencies, to the consolidated financial statements.
      General We are subject to federal, state and local pollution control laws and regulations in all locations where we have operating facilities. We anticipate that compliance with these laws and regulations will involve continuing capital expenditures and operating costs.
     Our original business and one of our core businesses for over nine decades is metals recycling. In the present era of conservation of natural resources and ecological concerns, we are committed to sound ecological and business conduct. Certain governmental regulations regarding environmental concerns, however well intentioned, may expose us and the industry to potentially significant risks. We believe that recycled materials are commodities that are diverted by recyclers, such as us, from the solid waste streams because of their inherent value. Commodities are materials that are purchased and sold in public and private markets and commodities exchanges every day around the world. They are identified, purchased, sorted, processed and sold in accordance with carefully established industry specifications.
      Solid and Hazardous Waste We currently own or lease, and in the past owned or leased, properties that have been used in our operations. Although we used operating and disposal practices that were standard in the industry at the time, wastes may have been disposed or released on or under the properties or on or under locations where such wastes have been taken for disposal. We are currently involved in the investigation and remediation of several such properties. State and federal laws applicable to wastes and contaminated properties have gradually become stricter over time. Under new laws, we could be required to remediate properties impacted by previously disposed wastes. We have been named as a potentially responsible party (“PRP”) at a number of contaminated sites.
     We generate wastes, including hazardous wastes, that are subject to the Federal Resource Conservation and Recovery Act (“RCRA”) and comparable state and/or local statutes where we operate. These statutes, regulations and laws may have limited disposal options for certain wastes.
      Superfund The U.S. Environmental Protection Agency (“EPA”) or an equivalent state agency notified us that we are considered a PRP at ten sites, none owned by us. We may be obligated under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) or a similar state statute to conduct remedial investigation, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. We are involved in litigation or administrative proceedings with regard to several of these sites in which we are contesting, or at the appropriate time we may contest, our liability at the sites. In addition, we have received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Because of various factors, including the ambiguity of the regulations, the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and cleanup costs and the extended time periods over which such costs may be incurred, we cannot reasonably estimate our ultimate costs of compliance with CERCLA. At August 31, 2009, based on currently available information, which is in many cases preliminary and incomplete, we had $2.2 million accrued for cleanup and remediation costs in connection with eight of the ten CERCLA sites. We have accrued for these liabilities based upon our best estimates. We are not able to reasonably estimate an amount for the two other CERCLA sites. The amounts paid and the expenses incurred on these sites for the years ended August 31, 2009, 2008 and 2007 were not material. Historically, the amounts that we have ultimately paid for such remediation activities have not been material.

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      Clean Water Act The Clean Water Act (“CWA”) imposes restrictions and strict controls regarding the discharge of wastes into waters of the United States, a term broadly defined, or into publicly owned treatment works. These controls have become more stringent over time and it is probable that additional restrictions will be imposed in the future. Permits must generally be obtained to discharge pollutants into federal waters or into publicly owned treatment works; comparable permits may be required at the state level. The CWA and many state agencies provide for civil, criminal and administrative penalties for unauthorized discharges of pollutants. In addition, the EPA’s regulations and comparable state regulations may require us to obtain permits to discharge storm water runoff. In the event of an unauthorized discharge or non-compliance with permit requirements, we may be liable for penalties and costs.
      Clean Air Act Our operations are subject to regulations at the federal, state and local level for the control of emissions from sources of air pollution. New and modified sources of air pollutants are often required to obtain permits prior to commencing construction, modification and/or operations. Major sources of air pollutants are subject to more stringent requirements, including the potential need for additional permits and to increased scrutiny in the context of enforcement. The EPA has been implementing its stationary emission control program through expanded enforcement of the New Source Review Program. Under this program, new or modified sources may be required to construct emission sources using what is referred to as the Best Available Control Technology, or in any areas that are not meeting national ambient air quality standards, using methods that satisfy requirements for Lowest Achievable Emission Rate. Additionally, the EPA is implementing new, more stringent standards for ozone and fine particulate matter. The EPA recently has promulgated new national emission standards for hazardous air pollutants for steel mills which will require specific sources in this category to meet the standards by reflecting application of maximum achievable control technology. Compliance with the new standards could require additional expenditures.
     In 2009, we incurred environmental expenses of $24.4 million. The expenses included the cost of environmental personnel at various divisions, permit and license fees, accruals and payments for studies, tests, assessments, remediation, consultant fees, baghouse dust removal and various other expenses. During 2009, $4.6 million of our capital expenditures related to costs directly associated with environmental compliance. At August 31, 2009, $14.3 million was accrued for environmental liabilities of which $6.4 million was classified as other long-term liabilities.
Dividends
     We have paid quarterly cash dividends in each of the past 180 consecutive quarters. We paid dividends in 2009 at the rate of $0.12 per share for all quarters.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
      Approach to Minimizing Market Risk See Note 7, Financial Instruments, Market and Credit Risk, to the consolidated financial statements for disclosure regarding our approach to minimizing market risk. Also, see Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements. The following types of derivative instruments were outstanding at August 31, 2009, in accordance with our risk management program.
      Currency Exchange Forwards We enter into currency exchange forward contracts as economic hedges of international trade commitments denominated in currencies other than the functional currency of the Company or its subsidiaries. No single foreign currency poses a primary risk to us. Fluctuations that cause temporary disruptions in one market segment tend to open opportunities in other segments.
      Commodity Prices We base pricing in some of our sales and purchase contracts on metal commodity futures exchange quotes which we determine at the beginning of the contract. Due to the volatility of the metal commodity indexes, we enter into metal commodity futures contracts for copper, aluminum and nickel. These futures mitigate the risk of unanticipated declines in gross margin due to the volatility of the commodity prices on these contractual commitments. Physical transaction quantities will not match exactly with standard commodity lot sizes, leading to minimal gains and losses from ineffectiveness.
      Natural Gas We enter into natural gas forward contracts as economic hedges of the Company’s Americas Mills operations based on anticipated consumption of natural gas in order to mitigate the risk of unanticipated increase to operating cost due to the volatility of natural gas prices.
      Freight We occasionally enter into freight forward contracts when sales commitments to customers include a fixed price freight component in order to minimize the effect of the volatility of ocean freight rates.

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      Interest Rates If interest rates increased or decreased by one percentage point, the impact on interest expense related to our variable-rate debt would be approximately $1 million and the impact on fair value of our long-term debt would be approximately $64 million as of August 31, 2009.
The following table provides certain information regarding the foreign exchange and commodity financial instruments discussed above.
Gross foreign currency exchange contract commitments as of August 31, 2009:
                                 
Functional Currency   Foreign Currency       U.S.
    Amount       Amount   Range of   Equivalent
Type   (in thousands)   Type   (in thousands)   Hedge Rates*   (in thousands)
 
AUD
    176     EUR     101     0.57 – 0.59   $ 144  
AUD
    40     GBP     20     0.50     33  
AUD
    158,312     USD     128,766     0.51 – 0.84     128,766  
EUR
    359     USD     513     1.43     513  
GBP
    4,106     EUR     4,775     0.85 – 0.88     6,726  
GBP
    1,319     USD     2,177     1.64 – 1.65     2,177  
HRK
    42,567     EUR     5,620     7.15 – 7.76     8,096  
HRK
    41,686     USD     7,243     5.15 – 5.81     7,243  
PLN
    363,033     EUR     91,748     3.80 – 4.57     124,249  
PLN
    232,148     USD     76,908     2.85 – 3.31     76,908  
SGD**
    2,314     USD     1,600     1.45     1,600  
USD
    5,618     EUR     3,945     1.38 – 1.43     5,618  
USD
    23,676     GBP     14,490     1.63     23,676  
USD
    1,833     JPY     174,755     94.62 – 99.60     1,833  
USD
    686     PLN     2,063     2.87 – 3.22     686  
 
 
                          $ 388,268  
 
*   Substantially all foreign currency exchange contracts mature within one year. The range of hedge rates represents functional to foreign currency conversion rates.
 
**   Singapore dollar
Gross metal commodity contract commitments as of August 31, 2009:
                                                         
                                            Range or   Total Contract
                                            Amount of   Value at
            Long/   # of   Standard   Total   Hedge Rates   Inception
Terminal Exchange   Metal   Short   Lots   Lot Size   Weight   Per MT/lb.   (in thousands)
 
London Metal Exchange
  Aluminum   Long     229     25  MT    5,725 MT    $ 1,920.00 – 2,340.00     $ 12,460  
 
  Aluminum   Short     6     25  MT    150 MT      5,067.50 – 5,098.50       762  
 
  Copper   Long     47     25  MT    1,175 MT      6,251.00 – 6,475.42       7,462  
 
  Copper   Short     38     25  MT    950 MT      4,899.50 – 6,402.00       5,347  
 
  Zinc   Long     2     25  MT    50 MT      1,900.75 – 1,948.00       70  
New York Mercantile Exchange
  Copper   Long     134     25,000  lbs.    3,350,000 lbs.      170.00 – 292.00       8,533  
 
  Copper   Short     588     25,000  lbs.    14,700,000 lbs.      195.70 – 298.45       38,039  
 
  Natural Gas   Long     7     10,000  MMBtu    70,000  MMBtu      3.95 – 4.90       322  
 
 
                                                  $ 72,995  
 
  MT = Metric Ton
 
  MMBtu = One million British thermal units

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
     Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
     Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of August 31, 2009. Deloitte & Touche LLP has audited the effectiveness of the Company’s internal control over financial reporting; their report is included on page 43 of this Form 10-K.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Commercial Metals Company
Irving, Texas
We have audited the internal control over financial reporting of Commercial Metals Company and subsidiaries (the “Company”) as of August 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended August 31, 2009 of the Company and our report dated October 30, 2009 expressed an unqualified opinion on those financial statements.
/s/ Deloitte & Touche LLP

Dallas, Texas
October 30, 2009

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Commercial Metals Company
Irving, Texas
We have audited the accompanying consolidated balance sheets of Commercial Metals Company and subsidiaries (the “Company”) as of August 31, 2009 and 2008, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended August 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Commercial Metals Company and subsidiaries at August 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of August 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 30, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ Deloitte & Touche LLP

Dallas, Texas
October 30, 2009

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Commercial Metals Company and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
                         
    Year ended August 31,
(in thousands, except share data)   2009   2008   2007
 
Net sales
  $ 6,793,396     $ 10,427,378     $ 8,329,016  
Costs and expenses:
                       
Cost of goods sold
    6,013,335       9,325,724       7,167,989  
Selling, general and administrative expenses
    671,202       707,786       583,810  
Interest expense
    76,998       58,263       36,334  
 
 
    6,761,535       10,091,773       7,788,133  
Earnings from continuing operations before income taxes and minority interests
    31,861       335,605       540,883  
Income taxes
    12,734       103,886       172,769  
 
Earnings from continuing operations before minority interests
    19,127       231,719       368,114  
Minority interests (benefit)
    (550 )     538       9,587  
 
Net earnings from continuing operations
    19,677       231,181       358,527  
 
                       
Earnings (loss) from discontinued operations before taxes
    2,064       1,706       (4,827 )
Income taxes (benefit)
    939       921       (1,731 )
 
Net earnings (loss) from discontinued operations
    1,125       785       (3,096 )
 
                       
 
Net earnings
  $ 20,802     $ 231,966     $ 355,431  
 
 
                       
Basic earnings (loss) per share:
                       
Earnings from continuing operations
  $ 0.18     $ 2.01     $ 3.04  
Earnings (loss) from discontinued operations
    0.01       0.01       (0.03 )
 
Net earnings
  $ 0.19     $ 2.02     $ 3.01  
 
                       
Diluted earnings (loss) per share:
                       
Earnings from continuing operations
  $ 0.17     $ 1.96     $ 2.95  
Earnings (loss) from discontinued operations
    0.01       0.01       (0.03 )
 
Net earnings
  $ 0.18     $ 1.97     $ 2.92  
See notes to consolidated financial statements.

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Commercial Metals Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
                 
    August 31,
(in thousands, except share data)   2009   2008
 
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 405,603     $ 219,026  
Accounts receivable (less allowance for collection losses of $42,134 and $17,652)
    731,282       1,369,453  
Inventories
    678,541       1,400,332  
Other
    182,126       228,632  
 
Total current assets
    1,997,552       3,217,443  
 
               
Property, plant and equipment:
               
Land
    87,530       84,539  
Buildings and improvements
    502,031       462,186  
Equipment
    1,395,104       1,292,832  
Construction in process
    380,185       256,156  
 
 
    2,364,850       2,095,713  
Less accumulated depreciation and amortization
    (1,013,461 )     (941,391 )
 
 
    1,351,389       1,154,322  
Goodwill
    74,236       84,837  
Other assets
    264,379       289,769  
 
 
  $ 3,687,556     $ 4,746,371  
     
                 
    August 31,
(in thousands, except share data)   2009   2008
 
Liabilities and stockholders’ equity
               
Current liabilities:
               
Accounts payable-trade
  $ 344,355     $ 838,777  
Accounts payable-documentary letters of credit
    109,210       192,492  
Accrued expenses and other payables
    327,212       563,424  
Income taxes payable and deferred income taxes
          156  
Notes payable
    1,759       31,305  
Current maturities of long-term debt
    32,802       106,327  
 
Total current liabilities
    815,338       1,732,481  
 
               
Deferred income taxes
    44,564       50,160  
Other long-term liabilities
    113,850       124,171  
Long-term debt
    1,181,740       1,197,533  
 
Total liabilities
    2,155,492       3,104,345  
 
               
Minority interests
    2,371       3,643  
Commitments and contingencies
               
Stockholders’ equity
               
Capital stock:
               
Preferred stock
           
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 112,573,433 and 113,777,152 shares
    1,290       1,290  
Additional paid-in capital
    380,737       371,913  
Accumulated other comprehensive income
    34,257       112,781  
Retained earnings
    1,438,205       1,471,542  
 
 
    1,854,489       1,957,526  
 
               
Less treasury stock 16,487,231 and 15,283,512 shares at cost
    (324,796 )     (319,143 )
 
Total stockholders’ equity
    1,529,693       1,638,383  
     
 
  $ 3,687,556     $ 4,746,371  
     

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Commercial Metals Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
                         
    Year ended August 31,
(in thousands)   2009   2008   2007
 
Cash flows from (used by) operating activities:
                       
Net earnings
  $ 20,802     $ 231,966     $ 355,431  
Adjustments to reconcile net earnings to cash flows from (used by) operating activities:
                       
Depreciation and amortization
    154,679       135,069       107,305  
Minority interests (benefit)
    (550 )     538       9,587  
Provision for losses (recoveries) on receivables
    33,733       4,478       (370 )
Share-based compensation
    17,475       18,996       12,499  
Net loss on sale of assets
    2,795       749       474  
Writedown of inventory
    127,056              
Asset impairment charges
    8,468       1,004       3,400  
Changes in operating assets and liabilities, net of acquisitions:
                       
(Increase) decrease in accounts receivable
    692,386       (287,052 )     (39,695 )
Accounts receivable sold (repurchased), net
    (129,227 )     45,348       115,672  
(Increase) decrease in inventories
    533,896       (414,556 )     (10,381 )
(Increase) decrease in other assets
    93,257       (177,510 )     (89,332 )
Increase (decrease) in accounts payable, accrued expenses, other payables and income taxes
    (691,912 )     395,987       (22,179 )
Decrease in deferred income taxes
    (49,066 )     (4,379 )     (10,603 )
Increase (decrease) in other long-term liabilities
    (7,256 )     5,906       29,482  
 
Net cash flows from (used by) operating activities
    806,536       (43,456 )     461,290  
 
                       
Cash flows used by investing activities:
                       
Capital expenditures
    (369,694 )     (355,041 )     (206,262 )
Purchase of minority interests in CMC Zawiercie
    (6 )     (169 )     (62,104 )
Proceeds from the sale of property, plant and equipment and other
    2,620       1,791       1,470  
Acquisitions, net of cash acquired
    (900 )     (228,422 )     (164,017 )
 
Net cash flows used by investing activities
    (367,980 )     (581,841 )     (430,913 )
 
                       
Cash flows from (used by) financing activities:
                       
Increase (decrease) in documentary letters of credit
    (83,282 )     39,061       11,718  
Short-term borrowings, net change
    (26,244 )     (1,427 )     (62,088 )
Repayments on long-term debt
    (132,496 )     (6,053 )     (72,282 )
Proceeds from issuance of long-term debt
    64,014       596,669       400,504  
Stock issued under incentive and purchase plans
    3,284       8,910       10,849  
Treasury stock acquired
    (18,514 )     (172,312 )     (59,169 )
Cash dividends
    (54,139 )     (52,061 )     (39,254 )
Tax benefits from stock plans
    926       10,982       16,894  
 
Net cash flows from (used by) financing activities
    (246,451 )     423,769       207,172  
Effect of exchange rate changes on cash
    (5,528 )     1,279       1,007  
 
Increase (decrease) in cash and cash equivalents
    186,577       (200,249 )     238,556  
Cash and cash equivalents at beginning of year
    219,026       419,275       180,719  
 
Cash and cash equivalents at end of year
  $ 405,603     $ 219,026     $ 419,275  
 

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Commercial Metals Company and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                                                                 
                            Accumulated                
    Common Stock   Additional   Other           Treasury Stock    
    Number of           Paid-In   Comprehensive   Retained   Number of        
(in thousands, except share data)   Shares   Amount   Capital   Income (Loss)   Earnings   Shares   Amount   Total
 
Balance, September 1, 2006
    129,060,664     $ 1,290     $ 346,994     $ 33,239     $ 980,454       (11,179,504 )   $ (141,873 )   $ 1,220,104  
 
Comprehensive income (loss):
                                                               
Net earnings
                                    355,431                       355,431  
Other comprehensive income (loss):
                                                               
Foreign currency translation adjustment, net of taxes ($2,038)
                            24,892                               24,892  
Unrealized gain on derivatives, net of taxes ($3,570)
                            7,074                               7,074  
Defined benefit obligation, net of taxes ($140)
                            (753 )                             (753 )
 
                                                               
Comprehensive income
                                                            386,644  
Cash dividends
                                    (39,254 )                     (39,254 )
Treasury stock acquired
                                            (2,116,975 )     (59,169 )     (59,169 )
Issuance of stock under incentive and purchase plans
                    (16,593 )                     2,603,880       27,442       10,849  
Issuance of restricted stock
                    (2,876 )                     206,482       2,876          
Stock-based compensation
                    12,564                       (8,166 )     (65 )     12,499  
Tax benefits from stock plans
                    16,894                                       16,894  
 
Balance, August 31, 2007
    129,060,664     $ 1,290     $ 356,983     $ 64,452     $ 1,296,631       (10,494,283 )   $ (170,789 )   $ 1,548,567  
 
                                                               
FIN 48 adjustment
                                    (4,994 )                     (4,994 )
Comprehensive income (loss):
                                                               
Net earnings
                                    231,966                       231,966  
Other comprehensive income (loss):
                                                               
Foreign currency translation adjustment, net of taxes ($5,179)
                            57,245                               57,245  
Unrealized loss on derivatives, net of taxes ($1,743)
                            (7,866 )                             (7,866 )
Defined benefit obligation, net of taxes ($366)
                            (1,050 )                             (1,050 )
 
                                                               
Comprehensive income
                                                            280,295  
 
                                                               
Cash dividends
                                    (52,061 )                     (52,061 )
Treasury stock acquired
                                            (6,212,238 )     (172,312 )     (172,312 )
Issuance of stock under incentive and purchase plans
                    (11,921 )                     1,277,417       20,831       8,910  
Issuance of restricted stock
                    (3,315 )                     163,770       3,315          
Stock-based compensation
                    19,184                       (18,178 )     (188 )     18,996  
Tax benefits from stock plans
                    10,982                                       10,982  
 
Balance, August 31, 2008
    129,060,664     $ 1,290     $ 371,913     $ 112,781     $ 1,471,542       (15,283,512 )   $ (319,143 )   $ 1,638,383  
 
                                                               
Comprehensive income (loss):
                                                               
Net earnings
                                    20,802                       20,802  
Other comprehensive income (loss):
                                                               
Foreign currency translation adjustment
                            (89,110 )                             (89,110 )
Unrealized gain on derivatives, net of taxes ($2,339)
                            11,034                               11,034  
Defined benefit obligation, net of taxes ($90)
                            (448 )                             (448 )
 
                                                               
Comprehensive loss
                                                            (57,722 )
 
                                                               
Cash dividends
                                    (54,139 )                     (54,139 )
Treasury stock acquired
                                            (1,752,900 )     (18,514 )     (18,514 )
Issuance of stock under incentive and purchase plans
                    (9,776 )                     561,800       13,060       3,284  
Stock-based compensation
                    17,674                       (12,619 )     (199 )     17,475  
Tax benefits from stock plans
                    926                                       926  
 
Balance, August 31, 2009
    129,060,664     $ 1,290     $ 380,737     $ 34,257     $ 1,438,205       (16,487,231 )   $ (324,796 )   $ 1,529,693  
 

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Commercial Metals Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      Nature of Operations The Company recycles, manufactures, and markets steel and metal products and related materials. Its domestic recycling facilities, mills, fabrication facilities, and markets are primarily located in the Sunbelt from the mid-Atlantic area through the west. Additionally, the Company operates steel minimills in Poland and Croatia, fabrication shops in Poland and Germany and processing facilities in Australia. Through its global marketing offices, the Company markets and distributes steel and nonferrous metal products and other industrial products worldwide. See Note 15, Business Segments.
      Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances are eliminated.
     Investments in 20% to 50% owned affiliates are accounted for on the equity method. All investments under 20% are accounted for under the cost method.
     On March 2, 2007, the Company purchased all of the minority shares of CMC Zawiercie (“CMCZ”) owned by the Polish government, representing 26.4% of the total CMCZ shares. During 2008, the Company acquired all of the remaining outstanding minority shares of CMCZ and now owns 100% of CMCZ.
      Revenue Recognition Sales are recognized when title passes to the customer either when goods are shipped or when they are delivered based upon the terms of the sale, there is persuasive evidence of an agreement, the price is fixed or determinable and collectability is reasonably assured. When the Company estimates that a contract with a customer will result in a loss, the entire loss is accrued as soon as it is probable and estimable. The Company accounts for fabrication projects in accordance with Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. As of August 31, 2009 and 2008, the Company recorded unbilled revenue related to fabrication projects of $27.2 million and $16.1 million, respectively, included in accounts receivable in the consolidated financial statements.
      Allowance for Doubtful Accounts. The Company maintains an allowance for doubtful accounts to reflect an estimate of the uncollectability of accounts receivable. These reserves are based on historical trends, current market conditions and customer’s financial condition.
      Cash and Cash Equivalents The Company considers temporary investments that are short term (with original maturities of three months or less) and highly liquid to be cash equivalents.
      Inventories Inventories are stated at the lower of cost or market. Inventory cost for most domestic inventories is determined by the last-in, first-out (“LIFO”) method; cost of international and remaining inventories is determined by the first-in, first-out (“FIFO”) method.
     Elements of cost in finished goods inventory in addition to the cost of material include depreciation, amortization, utilities, consumable production supplies, maintenance, production, wages and transportation costs. Additionally, the costs of departments that support production including materials management and quality control, are allocated to inventory.
      Property, Plant and Equipment Property, plant and equipment are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. Provision for amortization of leasehold improvements are made at annual rates based upon the lesser of the estimated useful lives of the assets or terms of the leases. Major maintenance is expensed as incurred. At August 31, 2009, the useful lives used for depreciation and amortization was as follows:
         
Buildings
    7 to 40 years  
Land improvements
    3 to 25 years  
Leasehold improvements
    3 to 15 years  
Equipment
    2 to 25 years  

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      Goodwill and Other Intangible Assets Goodwill represents the difference between the purchase price of acquired businesses and the fair value of their net assets. The Company accounts for goodwill under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). Under SFAS 142, goodwill is not amortized but reviewed for impairment on an annual basis or if a triggering event occurs. The Company tests for the impairment of goodwill by estimating the fair value of each reporting unit compared to its carrying value. The Company uses a discounted cash flow model to calculate the fair value of its reporting units. The model includes a number of significant assumptions and estimates regarding future cash flows including discount rates, volumes, prices, capital expenditures and the impact of current market conditions. The Company performs the goodwill impairment test in the fourth quarter each fiscal year and when changes in circumstances indicate an impairment event may have occurred. The Company incurred no impairment charges for goodwill for the years ended August 31, 2009, 2008 and 2007.
     The following intangible assets subject to amortization are included within other assets on the consolidated balance sheets as of August 31:
                                                 
    2009   2008
    Gross                   Gross        
    Carrying   Accumulated           Carrying   Accumulated    
(in thousands)   Amount   Amortization   Net   Amount   Amortization   Net
 
Customer base
  $ 66,227     $ 14,107     $ 52,120     $ 55,271     $ 5,036     $ 50,235  
Non-competition agreements
    11,200       6,016       5,184       12,371       4,343       8,028  
Favorable land leases
    5,880       380       5,500       7,325       388       6,937  
Brand name
    5,214       4,637       577       5,467       229       5,238  
Production backlog
    3,198       3,198             2,815       1,023       1,792  
Other
    1,596       296       1,300       553       134       419  
 
Total
  $ 93,315     $ 28,634     $ 64,681     $ 83,802     $ 11,153     $ 72,649  
 
     Excluding goodwill, there are no other significant intangible assets with indefinite lives. During 2009, the gross carrying value of intangible assets increased and goodwill decreased approximately $10 million due to final purchase price allocations for certain acquisitions acquired in the fourth quarter of fiscal year 2008. Amortization expense for intangible assets for the years ended August 31, 2009, 2008, and 2007 was $18.9 million, $8.3 million and $7.1 million, respectively. At August 31, 2009, the weighted average remaining useful lives of these intangible assets, excluding the favorable land leases in Poland, was five years. The weighted average lives of the favorable land leases was 80 years. Estimated amounts of amortization expense for the next five years are as follows:
         
Year   (in thousands)
 
2010
  $ 11,991  
2011
    11,170  
2012
    9,609  
2013
    7,903  
2014
    7,864  
      Impairment of Long-Lived Assets In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), the Company evaluates the carrying value of property, plant and equipment and definite-lived assets whenever a change in circumstances indicates that the carrying value may not be recoverable from the undiscounted future cash flows from operations. If an impairment exists, the net book values are reduced to fair values as warranted. During the second quarter of 2009, the Company recorded an impairment charge of $5.1 million to write down the value of plant, property and equipment at two divisions. During the fourth quarter of 2009, the Company ceased using the brand names of several acquired businesses and the Company recorded an impairment charge of $3.4 million to write off the value of these brand names. The Company recorded impairment charges of $1.0 million and $3.4 million during 2008 and 2007, respectively.
      Severance Charges During 2009, the Company incurred severance costs of $12.5 million related to involuntary employee terminations initiated as part of the Company’s focus on operating expense management and reductions in headcount to meet current production levels. These termination benefits have been included in selling, general and administrative expenses in the Company’s consolidated financial statements. Additionally, during 2008, the Company accrued severance costs related to the division classified as a discontinued operation of $4.1 million. As of

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August 31, 2009 and 2008, the remaining liability to be paid in the future related to termination benefits was $2.0 million and $4.1 million, respectively.
      Environmental Costs The Company accrues liabilities for environmental investigation and remediation costs when it is both probable and the amount can be reasonably estimated. Environmental costs are based upon estimates regarding the sites for which the Company will be responsible, the scope and cost of work to be performed at each site, the portion of costs that will be shared with other parties and the timing of remediation. Where timing and amounts cannot be reasonably determined, a range is estimated and the lower end of the range is recorded.
      Stock-Based Compensation The Company recognizes share-based compensation in accordance with SFAS No. 123 (R), Share-Based Payments (“SFAS 123 (R)”), which requires compensation cost relating to share-based transactions be recognized at fair value in financial statements. The fair value of each share-based award is estimated at the date of grant using either the Black-Scholes pricing model or a binomial model. Total compensation cost is amortized on a straight-line basis over the vesting period of issued awards.
     The Company recognized share-based compensation expense of $17.5 million, $19.0 million and $12.5 million as a component of selling, general and administrative expenses for the twelve months ended August 31, 2009, 2008 and 2007, respectively. At August 31, 2009, the Company had $9.0 million of total unrecognized pre-tax compensation cost related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the next 32 months.
     The Black-Scholes pricing model was used for stock options and Stock Appreciation rights (“SARs”) and the following weighted average assumptions were used for grants in the years ended August 31:
                         
    2009   2008   2007
 
Risk-free interest rate
    1.24 %     2.93 %     4.98 %
Expected life
  3.88  years   4.38  years   4.58  years
Expected volatility
    60 %     43 %     34 %
Expected dividend yield
    1.1 %     1.1 %     1.1 %
     The weighted average per share fair value of these awards granted in 2009, 2008 and 2007 was $4.69, $12.58, and $11.28, respectively.
     The binomial model was used for performance-based awards and the following assumptions were used for grants in the year ended August 31:
         
    2009
 
Risk-free interest rate
    1.37 %
Expected life
  2.64  years  
Expected volatility
    69 %
Expected dividend yield
    2.9 %
     The average per share fair value of these awards granted in 2009 was $8.89.
     See Note 10, Capital Stock, for share information on options, SARs and performance-based awards at August 31, 2009.
      Accounts Payable — Documentary Letters of Credit In order to facilitate certain trade transactions, the Company utilizes documentary letters of credit to provide assurance of payment to its suppliers. These letters of credit may be for prompt payment or for payment at a future date conditional upon the bank finding the documentation presented to be in strict compliance with all terms and conditions of the letter of credit. The banks issue these letters of credit under informal, uncommitted lines of credit which are in addition to the Company’s contractually committed revolving credit agreement. In some cases, if the Company’s suppliers choose to discount the future dated obligation, the Company may pay the discount cost.
      Income Taxes The Company and its U.S. subsidiaries file a consolidated federal income tax return, and federal income taxes are allocated to subsidiaries based upon their respective taxable income or loss. Deferred income taxes are provided for temporary differences between financial and tax reporting. The principal differences are described in Note 9, Income Taxes. Benefits from tax credits are reflected currently in earnings. As of August 31, 2009, the Company intends to indefinitely reinvest all undistributed earnings of non-U.S. subsidiaries.

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     The Company accounts for uncertainty in income taxes in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109 (“FIN 48”) and records income tax positions based on a more likely than not threshold that the tax positions will be sustained on examination by the taxing authorities having full knowledge of all relevant information.
      Foreign Currencies The functional currency of most of the Company’s European marketing and distribution operations is the euro. The functional currencies of the Company’s Australian, CMCZ, CMCS, United Kingdom, and certain Chinese, Mexican and Singaporean operations are their local currencies. The remaining international subsidiaries’ functional currency is the U.S. dollar. Translation adjustments are reported as a component of accumulated other comprehensive income (loss). Transaction gains (losses) from transactions denominated in currencies other than the functional currencies, recorded as a component of selling, general and administrative expenses, were $(5.3) million, $4.4 million and $(0.9) million for the years ended August 31, 2009, 2008 and 2007, respectively.
      Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make significant estimates regarding assets and liabilities and associated revenues and expenses. Management believes these estimates to be reasonable; however, actual results may vary.
      Derivative Financial Instruments The Company records derivative instruments on the balance sheet as assets or liabilities, measured at fair value. Gains or losses from the changes in the values of the derivative instruments and hedged items are recorded in the statement of earnings, or are deferred if they are designated for hedge accounting and are highly effective in achieving offsetting changes in fair values or cash flows of the hedged items during the term of the hedge.
      Comprehensive Income (Loss) The Company reports comprehensive income (loss) in its consolidated statement of stockholders’ equity. Comprehensive income (loss) consists of net earnings plus gains and losses affecting stockholders’ equity that, under generally accepted accounting principles, are excluded from net earnings, such as gains and losses related to certain derivative instruments, defined benefit plan obligations and translation effect of foreign currency assets and liabilities, net of tax. Accumulated other comprehensive income (loss), net of taxes, is comprised of the following:
                 
(in thousands)   2009   2008
 
Foreign currency translation adjustment
  $ 31,557     $ 120,667  
Unrealized gain (loss) on derivatives
    4,951       (6,083 )
Defined benefit obligations
    (2,251 )     (1,803 )
 
Total
  $ 34,257     $ 112,781  
 
      Recent Accounting Pronouncements In December 2007, The FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). SFAS 141(R) establishes principles for recognizing and measuring the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquired business and goodwill acquired in a business combination. In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP 141(R)-1”). FSP 141(R)-1 amends and clarifies SFAS 141(R), to address application issues raised on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The Company is required to adopt the provisions of these statements in the first quarter of fiscal 2010. This standard will impact our accounting treatment for future business combinations.
     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB 51 (“SFAS 160”). SFAS 160 requires minority interests to be reported as equity on the balance sheet, changes the reporting of net earnings to include both the amounts attributable to the affiliate’s parent and the noncontrolling interest and clarifies the accounting for changes in the parent’s interest in an affiliate. The Company is required to adopt the provisions of this statement in the first quarter of fiscal 2010. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.
     In June 2008, the FASB issued FSP No. Emerging Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“FSP 03-6-1”). FSP 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of

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earnings per share under the two-class method described in SFAS No. 128, Earnings Per Share . FSP 03-6-1 is effective for the Company’s fiscal year 2010. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.
     In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP 107-1”). FSP 107-1 requires disclosures regarding fair value of financial instruments for interim and annual reporting periods of publicly traded companies to provide financial statement users with more timely and transparent information. The Company is required to adopt the provisions of this statement in the first quarter of 2010. The adoption is not expected to have any material impact on the Company’s consolidated financial statements.
     In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140 (“SFAS 166”). SFAS 166 clarifies the determination of a transferor’s continuing involvement in a transferred financial asset and limits the circumstances in which a financial asset should be derecognized when the transferor has not transferred the entire original financial asset. The Company is required to adopt the provisions of this statement in the first quarter of fiscal 2011. The Company is still in the process of evaluating the impact, if any, SFAS 166 will have on the Company’s consolidated financial statements.
     In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes the FASB Accounting Standards Codification as the source of authoritative non-governmental generally accepted accounting principles (“GAAP”). The Company is required to adopt the provisions of this statement in the first quarter of fiscal 2010. The Company does not expect this pronouncement to have a material impact on the Company’s consolidated financial statements, though it will change future references of accounting literature disclosed in the notes to the consolidated financial statements.
NOTE 2. ACQUISITIONS
     During the year ended August 31, 2009, the Company did not have any material business acquisitions.
2008
     During the year ended August 31, 2008, the Company acquired the following businesses:
    On September 19, 2007, the Company acquired all of the outstanding shares of Valjaonica Cijevi Sisak (“VCS”) from the Croatian Privatization Fund and Croatian government. VCS’s name has been changed to CMC Sisak d.o.o. (“CMCS”). CMCS is an electric arc furnace based steel pipe manufacturer located in Sisak, Croatia with annual capacity estimated of 336,000 short tons.
 
    On September 19, 2007, the Company acquired the operating assets of Economy Steel, Inc. of Las Vegas, Nevada. The acquired assets operate under the name of CMC Economy Steel. This operation is a rebar fabricator, placer, construction-related products supplier and steel service center. The acquisition supports the development and success of the Company’s mill in Arizona.
 
    On December 31, 2007, the Company acquired a 70% interest in a newly incorporated business, CMC Albedo Metals which acquired an existing metals recycling business in Singapore. On April 16, 2008, the Company acquired the remaining 30% interest in CMC Albedo Metals. CMC Albedo Metals name has been changed to CMC Recycling Singapore.
 
    On April 29, 2008, the Company acquired the operating assets of Rebar Services and Supply Company of Fort Worth, Texas. The acquired assets operate under the name of CMC Rebar, as part of CMC Americas Fabrication and Distribution Segment.
 
    On June 5, 2008, the Company’s subsidiary, CMC Poland, completed the acquisition of substantially all the outstanding shares of PHP NIKE S.A. (“PHP Nike”). PHP Nike is a producer of welded steel meshes, cold rolled wire rod and cold rolled rebar in Poland with annual production capacity of 100,000 short tons.
 
    On July 1, 2008, the Company completed the acquisition of substantially all of the operating assets of ABC Coating Companies and affiliates (“ABC Coating”). ABC Coating is involved in rebar fabrication and epoxy

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      coated reinforcing bar servicing the Southwest, Midwest and Southeast U.S. with an annual capacity of 150,000 short tons. ABC Coating is included as part of CMC Americas Fabrication and Distribution segment.
 
    On August 29, 2008, the Company completed the acquisition of substantially all of the operating assets of Reinforcing Post-Tensioning Services, Inc. and affiliates (“RPS”). RPS is a fabricator and installer of concrete reinforcing steel, post-tensioning cable and related products for commercial and public construction projects with an annual capacity of approximately 150,000 tons. RPS is included as part of CMC Americas Fabrication and Distribution segment.
     These acquisitions are expected to strengthen the Company’s marketing position in the respective regions and product lines. The total purchase price of $231.5 million ($228.4 million in cash and $3.1 million in notes payable) for the acquisitions in 2008 was allocated to the acquired assets and assumed liabilities based on estimates of their respective fair values. The Company also has committed to spend not less than $38 million over five years in capital expenditures for CMCS and increase working capital by approximately $39 million. The following is a summary of the allocation of the total purchase price as of the date of the respective acquisitions:
         
(in thousands)   Total
 
Accounts receivable
  $ 20,415  
Inventories
    78,087  
Other current assets
    7,589  
Property, plant and equipment
    112,077  
Goodwill
    53,405  
Intangible assets
    49,047  
Other assets
    10,294  
Liabilities
    (99,377 )
 
Net assets acquired
  $ 231,537  
 
     The intangible assets acquired include customer bases, trade names and non-competition agreements which are being amortized between four and eight years and backlog, which is being amortized over 12 months.
     The pro forma effect of the acquisitions on consolidated net earnings would not have been materially different than reported.
2007
     During the year ended August 31, 2007, the Company acquired the following businesses:
    On August 24, 2007, the Company completed the acquisition of substantially all of the operating assets of Mayfield Salvage, Inc., a scrap recycling business located in Alexander City, Alabama.
 
    On August 15, 2007, the Company completed the acquisition of substantially all the operating assets of Conesco, Inc., with facilities in Salt Lake City, Utah and Boise, Idaho. Conesco, Inc. is a supplier of concrete equipment, forms and accessories.
 
    On April 17, 2007, the Company completed the acquisition of substantially all the operating assets of the related companies consisting of Nicholas J. Bouras, Inc., United Steel Deck, Inc., The New Columbia Joist Company, and ABA Trucking Corporation. The acquisition establishes CMC as a manufacturer of steel deck.
 
    On January 4, 2007, the Company completed the acquisition of the operating assets and inventory of Bruhler Stahlhandel GmbH steel fabrication business in Rosslau/Saxony-Anhalt in eastern Germany. The acquisition was made by CMC’s subsidiary Commercial Metals Deutschland GmbH.
     These acquisitions are expected to strengthen the Company’s marketing position in the respective regions and product lines. The total purchase price of $165.0 million ($164.0 million in cash and $1.0 million in notes payable) for the acquisitions in 2007 was allocated to the acquired assets and assumed liabilities based on estimates of their respective fair values. The following is a summary of the allocation of the total purchase price as of the date of the respective acquisitions:

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(in thousands)   Total
 
Inventories
  $ 88,315  
Other current assets
    10  
Property, plant and equipment
    64,943  
Goodwill
    1,959  
Intangible assets
    10,991  
Other assets
    1,556  
Liabilities
    (2,812 )
 
Net assets acquired
  $ 164,962  
 
     The intangible assets acquired include customer bases, trade names and non-competition agreements which are being amortized over five years and a backlog, which is being amortized over nine months.
     The pro forma effect of the acquisitions on consolidated net earnings would not have been materially different than reported.
     On March 2, 2007, the Company purchased all of the shares of CMCZ owned by the Polish Ministry of State Treasury for approximately $60 million. The shares acquired represent 26.4% of the total CMCZ shares outstanding.
NOTE 3. SALES OF ACCOUNTS RECEIVABLE
     The Company has an accounts receivable securitization program which it utilizes as a cost-effective, short-term financing alternative. Under this program, the Company and several of its subsidiaries periodically sell certain eligible trade accounts receivable to the Company’s wholly-owned consolidated special purpose subsidiary (“CMCRV”). CMCRV is structured to be a bankruptcy-remote entity and was formed for the sole purpose of buying and selling receivables generated by the Company. The Company, irrevocably and without recourse, transfers all applicable trade accounts receivable to CMCRV. CMCRV, in turn, sells an undivided percentage ownership interest in the pool of receivables to affiliates of two third party financial institutions. On June 12, 2009, the agreement with the financial institution affiliates was amended and extended to December 18, 2009. The amended agreement reduced the total facility from $200 million to $100 million. The Company intends to amend and extend the facility in fiscal year 2010.
     The Company accounts for its transfers of receivables to CMCRV together with CMCRV’s sales of undivided interests in these receivables to the financial institutions as sales in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities . Additionally, during the second quarter of 2009, the Company adopted FSP No. 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities , to provide additional disclosures about transfers of financial assets and involvement with variable interest entities. At the time an undivided interest in the pool of receivables is sold, the amount is removed from the consolidated balance sheet and the proceeds from the sale are reflected as cash provided by operating activities.
     At August 31, 2009 and 2008, accounts receivable of $141 million and $420 million, respectively, had been sold to CMCRV. The Company’s undivided interest in these receivables (representing the Company’s retained interest) was 100% at August 31, 2009 and 2008. The sale of receivables to institutional buyers provides the Company with added financial flexibility, if needed, to fund the Company’s ongoing operations. The average monthly amounts of undivided interests owned by the financial institutional buyers were $20.8 million, $8.3 million and $6.2 million for the years ended August 31, 2009, 2008 and 2007, respectively. The carrying amount of the Company’s retained interest in the receivables approximated fair value due to the short-term nature of the collection period. No other material assumptions are made in determining the fair value of the retained interest. This retained interest is subordinate to, and provides credit enhancement for, the financial institution buyers’ ownership interest in CMCRV’s receivables, and is available to the financial institution buyers to pay any fees or expenses due to them and to absorb all credit losses incurred on any of the receivables. The Company is responsible for servicing the entire pool of receivables; however, no servicing asset or liability is recorded as these receivables are collected in the normal course of business and the collection of receivables related to any sales to third party institutional buyers are normally short term in nature. This U.S. securitization program contains certain cross-default provisions whereby a termination event could occur if the Company defaulted under one of its credit arrangements.
     In addition to the securitization program described above, the Company’s international subsidiaries in Australia, Europe, Poland and a domestic subsidiary periodically sell accounts receivable without recourse. These arrangements constitute true sales and, once the accounts are sold, are no longer available to satisfy the Company’s creditors in the event of bankruptcy. Uncollected accounts receivable sold under these international arrangements and removed from the consolidated balance sheets were $93.7 million and $222.9 million at August 31, 2009 and

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2008, respectively. The average monthly amounts of international accounts receivable sold were $110.8 million, $206.8 million and $99.0 million for the years ended August 31, 2009, 2008 and 2007, respectively. The Company’s Australian subsidiary entered into an agreement with a financial institution to periodically sell certain trade accounts receivable up to a maximum of AUD 126 million ($107 million). This Australian program contains financial covenants whereby our subsidiary must meet certain coverage and tangible net worth levels, as defined. At August 31, 2009, our Australian subsidiary was not in compliance with these covenants. As a result, the financial institution could terminate the accounts receivable program. On October 15, 2009, Commercial Metals Company provided a guarantee of our subsidiary’s performance resulting in the financial covenants at August 31, 2009 being waived. The guarantee will cease to be effective when the subsidiary is in compliance with the financial covenants for two consecutive quarters.
     During 2009, proceeds from the sale of receivables were $966.5 million and cash payments to the owners of receivables were $1,095.7 million. Discounts on domestic and international sales of accounts receivable were $4.9 million, $11.1 million and $5.6 million for the years ended August 31, 2009, 2008 and 2007, respectively. These losses primarily represented the costs of funds and were included in selling, general and administrative expenses.
NOTE 4. INVENTORIES
     Inventories are stated at the lower of cost or market. Inventory cost for most domestic inventories is determined by the LIFO method. LIFO inventory reserves were $241.7 million and $562.3 million at August 31, 2009 and 2008, respectively. Inventory cost for international inventories and the remaining inventories are determined by the FIFO method.
     At August 31, 2009 and 2008, 62% and 45%, respectively, of total inventories were valued at LIFO. The remainder of inventories, valued at FIFO, consisted mainly of material dedicated to CMCZ and certain marketing and distribution businesses.
     The majority of the Company’s inventories are in the form of finished goods, with minimal work in process. At August 31, 2009 and 2008, $52.9 million and $104.5 million, respectively, were in raw materials.
     During 2009, 2008 and 2007, inventory quantities in certain LIFO pools were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of current purchases. The effect for 2009 decreased cost of goods sold by $75.9 million and increased net earnings by $49.3 million. The effect for 2008 decreased cost of goods sold by $8.4 million and increased net earnings by $5.4 million. The effect for 2007 decreased cost of goods sold by $12.9 million and increased net earnings by $8.4 million
NOTE 5. DISCONTINUED OPERATIONS
     On August 30, 2007, the Company’s Board approved a plan to offer for sale a division (the “Division”) which is involved with the buying, selling and distribution of nonferrous metals, namely copper, aluminum and stainless steel semifinished products. At August 31, 2009, in connection with the closure of the Division, all inventory of this Division had been sold or absorbed by other divisions of the Company. As a result, the Division is presented as a discontinued operation in the consolidated statements of earnings. In connection with the closure, the Division established a $2.6 million reserve for the termination of the office lease during 2009. During 2009 and 2008, the Division recorded LIFO income of $26.4 million and $2.4 million, respectively.
     The Division is in the International Fabrication and Distribution segment. Various financial information for the Division is as follows:
                         
(in thousands)   2009   2008   2007
 
At August 31,
                       
Current assets
  $ 555     $ 83,048     $ 93,385  
Noncurrent assets
    1,494       2,650       1,795  
Current liabilities
    6,543       31,258       34,889  
Noncurrent liabilities
          580       874  
 
                       
Fiscal Year
                       
Revenue
    90,037       337,178       422,136  
Earnings (loss) before taxes
    2,064       1,706       (4,827 )

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NOTE 6. CREDIT ARRANGEMENTS
     The Company’s commercial paper program permits maximum borrowings of up to $400 million. The program’s capacity is reduced by outstanding standby letters of credit which totaled $27.9 million as of August 31, 2009. It is the Company’s policy to maintain contractual bank credit lines equal to 100% of the amount of the commercial paper program. The $400 million unsecured revolving credit agreement has a minimum interest coverage ratio requirement of two and one-half times and a maximum debt to capitalization requirement of 60%. The agreement provides for interest based on LIBOR, Eurodollar or Bank of America’s prime rate. The facility fee is 12.5 basis points per annum and no compensating balances are required. The Company was in compliance with these requirements at August 31, 2009. At August 31, 2009 and 2008, no borrowings were outstanding under the commercial paper program or the related revolving credit agreement. The revolving credit agreement matures on May 23, 2010 and the Company intends to renegotiate and extend the facility in fiscal year 2010.
     The Company has numerous uncommitted credit facilities available from domestic and international banks. No commitment fees or compensating balances are required under these credit facilities. These credit facilities are used, in general, to support import Letters of Credit (including accounts payable settled under bankers’ acceptances as described in Note 1. Summary of Significant Accounting Polices), foreign exchange transactions and short term advances which are priced on a cost of funds basis.
     Long-term debt was as follows, as of August 31:
                 
(in thousands)   2009   2008
 
6.75% notes due February 2009
  $     $ 100,000  
5.625% notes due November 2013
    200,000       200,000  
6.50% notes due July 2017
    400,000       400,000  
7.35% notes due August 2018
    500,000       500,000  
CMCZ term note due May 2013
    104,945       77,037  
CMCP term note due August 2013
          17,608  
Other, including equipment notes
    9,597       9,215  
 
 
    1,214,542       1,303,860  
Less current maturities
    32,802       106,327  
 
 
  $ 1,181,740     $ 1,197,533  
 
     Interest on the notes, except for the CMCZ notes, is payable semiannually.
     In August 2008, the Company issued $500 million in senior unsecured notes due in August 2018. These notes have a coupon rate of 7.35% per annum. In anticipation of the offering, the Company entered into hedge transactions which reduced the Company’s effective interest rate on these notes to 7.29% per annum.
     In February 2009, the Company repaid the $100 million of 6.75% coupon rate notes.
     CMCZ has a five year term note of PLN 400 million ($139.9 million) with a group of four banks. At August 31, 2009, the notes had an outstanding balance of PLN 300 million ($104.9 million). The term note is used to finance operating expenses of CMCZ and the development of a rolling mill. The note has scheduled principal and interest payments in 15 equal quarterly installments beginning in November 2009. Interest is accrued at WIBOR plus 0.79%. The weighted average rate at August 31, 2008 was 5.7%. The term note contains certain financial covenants for CMCZ. At August 31, 2009, CMCZ was not in compliance with these covenants which resulted in a guarantee by Commercial Metals Company becoming effective. As a result of the guarantee, the financial covenant requirements became void; however, all other terms of the loan remain in effect, including the payment schedule. The guarantee will cease to be effective when CMCZ is in compliance with the financial covenants for two consecutive quarters.
     CMCP, a wholly-owned subsidiary of the Company, owns and operates equipment at the CMCZ mill site. In connection with the equipment purchase, CMCP issued equipment notes under a term agreement dated September 2005 with PLN 7.0 million ($2.4 million) outstanding at August 31, 2009. Installment payments under these notes are due through 2010. Interest rates are variable based on the Poland Monetary Policy Council’s rediscount rate, plus an applicable margin. The weighted average rate at August 31, 2009 was 5.0%. The notes are secured by the shredder equipment.
     CMCP had a five year term note of PLN 80 million with two banks. The outstanding balance of $28.0 million was repaid in August 2009.

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     CMC Sisak had current notes to banks with maximum borrowings of HRK 140 million. The outstanding balance in the amount of $24.8 million was repaid in December 2008.
     CMCZ had a revolving credit facility with maximum borrowings of PLN 100 million bearing interest at the Warsaw Interbank Offered Rate (“WIBOR”) plus 0.5% and collateralized by CMCZ’s accounts receivable. This facility expired on June 3, 2009. CMCZ intends to enter into a new revolving credit facility in fiscal 2010.
     The scheduled maturities of the Company’s long-term debt are as follows:
         
(in thousands)        
 
2010
  $ 32,802  
2011
    29,656  
2012
    29,654  
2013
    22,130  
2014 and thereafter
    1,100,300  
 
Total
  $ 1,214,542  
 
     Interest of $12.6 million, $6.9 million, and $3.2 million was capitalized in the cost of property, plant and equipment constructed in 2009, 2008 and 2007, respectively. Interest of $91.2 million, $63.3 million, and $37.2 million was paid in 2009, 2008 and 2007, respectively.
NOTE 7. FINANCIAL INSTRUMENTS, MARKET AND CREDIT RISK
     Due to near-term maturities, allowances for collection losses, investment grade ratings and security provided, the following financial instruments’ carrying amounts are considered equivalent to fair value:
    Cash and cash equivalents
 
    Accounts receivable/payable
 
    Trade financing arrangements
 
    Term note — CMCZ
     The Company’s long-term debt is predominantly publicly held. Fair value was determined by indicated market values:
                 
    August 31,
(in thousands)   2009   2008
 
Long-Term Debt:
               
Carrying amount
  $ 1,181,740     $ 1,197,533  
Estimated fair value
    1,173,280       1,177,442  
     The Company maintains both corporate and divisional credit departments. Credit limits are set for each customer. Some of the Company’s divisions use credit insurance or letters of credit to ensure prompt payment in accordance with terms of sale. Generally, collateral is not required. The Company’s accounts receivable were secured by credit insurance and/or letters of credit in the amount of $371 million and $824 million at August 31, 2009 and 2008, respectively.
     In the normal course of its marketing activities, the Company transacts business with substantially all sectors of the metal industry. Customers are internationally dispersed, cover the spectrum of manufacturing and distribution, deal with various types and grades of metal and have a variety of end markets in which they sell. The Company’s historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, no additional credit risk, beyond amounts provided for collection losses, is believed inherent in the Company’s accounts receivable.
     On December 1, 2008, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”), which requires enhanced disclosures about a company’s derivative instruments and hedging activities. The adoption of SFAS 161 did not have any financial impact on the Company’s consolidated financial statements.
     The Company’s worldwide operations and product lines expose it to risks from fluctuations in metals commodity prices, foreign currency exchange rates and natural gas prices. The objective of the Company’s risk management

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program is to mitigate these risks using futures or forward contracts (derivative instruments). The Company enters into metal commodity futures and forward contracts to mitigate the risk of unanticipated declines in gross margin due to the volatility of the commodities’ prices, enters into foreign currency forward contracts which match the expected settlements for purchases and sales denominated in foreign currencies and enters into natural gas forward contracts to mitigate the risk of unanticipated changes in operating cost due to the volatility of natural gas prices. Also, when sales commitments to customers include a fixed price freight component, the Company occasionally enters into freight forward contracts to minimize the effect of the volatility of ocean freight rates.
     The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the statements of operations, and there were no components excluded from the assessment of hedge effectiveness for the year ended August 31, 2009. Certain of the foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.
     The following tables summarize activities related to the Company’s derivative instruments and hedged (underlying) items recognized within the statements of operations (in thousands) for the year ended August 31:
             
Derivatives Not Designated as Hedging Instruments   Location   2009
 
Commodity
  Cost of goods sold   $ 14,666  
Foreign exchange
  Net sales     532  
Foreign exchange
  Cost of goods sold     26  
Foreign exchange
  SG&A expenses     (9,816 )
Other
  Cost of goods sold     (941 )
Other
  SG&A expenses     97  
 
Gain recognized into operations before taxes
      $ 4,564  
 
     The Company’s fair value hedges are designated for accounting purposes with gains and losses on the hedged item (underlying) items offsetting the gain or loss on the related derivative transaction. Hedged (underlying) items mainly relate to firm commitments on commercial sales, purchases and capital expenditures.
             
Derivatives Designated as Fair Value Hedging Instruments   Location   2009
 
Foreign exchange
  SG&A expenses   $ 43,185  
 
Gain recognized into operations before taxes
      $ 43,185  
 
             
Hedged (Underlying) Items Designated as Fair Value Hedging Instruments   Location   2009
 
Foreign exchange
  Net sales   $ 32  
Foreign exchange
  SG&A expenses     (43,212 )
 
Loss recognized into operations before taxes
      $ (43,180 )
 
         
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments   2009
 
Commodity
  $ (360 )
Foreign exchange
    11,446  
 
Gain recognized in accumulated other comprehensive income (loss), net of taxes
  $ 11,086  
 
             
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments   Location   2009  
 
Commodity
  Cost of goods sold $   (284 )
Foreign exchange
  SG&A expenses     (122 )
Interest rate
  Interest expense     458  
 
Gain reclassified from accumulated other comprehensive income (loss) into operations, net of taxes $   52  
 
     The Company’s derivative instruments were recorded at their respective fair values as follows on the consolidated balance sheet (in thousands):
         
Derivative Assets:   August 31, 2009
 
Commodity — designated
  $ 13  
Commodity — not designated
    2,948  
Foreign exchange — designated
    3,823  
Foreign exchange — not designated
    4,678  
 
Derivative assets (other current assets)*
  $ 11,462  
 

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Derivative Liabilities   August 31, 2009
 
Commodity — designated
  $ 35  
Commodity — not designated
    8,895  
Foreign exchange — designated
    6,421  
Foreign exchange — not designated
    1,420  
 
Derivative liabilities (accrued expenses and other payables)*
  $ 16,771  
 
 
*   Derivative assets and liabilities disclosed under SFAS 161 do not include the hedged (underlying) items designated as fair value hedges.
     During the twelve months following August 31, 2009, $0.3 million in gains related to commodity hedges and capital expenditures are anticipated to be reclassified into net earnings as the related transactions mature and the assets are placed into service, respectively. Also, an additional $0.5 million in gains will be reclassified as interest income related to an interest rate lock.
     As of August 31, 2009, all of the Company’s derivative instruments designated to hedge exposure to the variability in future cash flows of the forecasted transactions will mature within 12 months.
     All of the instruments are highly liquid, and none are entered into for trading purposes.
NOTE 8. FAIR VALUE
     On September 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities (“SFAS 159”), which permits entities to choose to measure certain financial assets and liabilities at fair value. The adoption of SFAS 159 had no impact on the consolidated financial statements because the Company did not elect the fair value option for any financial assets or financial liabilities that were not already recorded at fair value.
     On September 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosure about fair value measurements. The adoption of SFAS 157 did not have any impact on the Company’s consolidated financial statements. In February 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 , which delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities. SFAS 157 is effective for the first quarter of fiscal 2010. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.
     SFAS 157 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement.
     The following table summarizes information regarding the Company’s financial assets and financial liabilities that are measured at fair value:
                                 
            Fair Value Measurements at Reporting Date Using
            Quoted Prices in        
            Active Markets for   Significant Other   Significant
    August 31,   Identical Assets   Observable Inputs   Unobservable Inputs
(in thousands)   2009   (Level 1)   (Level 2)   (Level 3)
 
Cash equivalents
  $ 357,723     $ 357,723     $     $   —  
Derivative assets
    11,462       2,948       8,514        
Nonqualified benefit plan assets *
    55,596       55,596              
Derivative liabilities
    16,711       8,895       7,876        
Nonqualified benefit plan liabilities *
    96,904       96,904              
 
*   The Company provides a nonqualified benefit restoration plan to certain eligible executives equal to amounts that would have been available under tax qualified ERISA plans but for limitations of ERISA, tax laws and regulations. Though under no obligation to fund this plan, the Company has segregated assets in a trust. The plan assets and liabilities consist of securities included in various mutual funds.

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NOTE 9. INCOME TAX
     The provision for income taxes includes the following:
                         
    Year ended August 31,
(in thousands)   2009   2008   2007
 
Current:
                       
United States
  $ 45,691     $ 66,923     $ 137,566  
Foreign
    (4,537 )     44,267       32,244  
State and local
    20,902       17,332       13,583  
 
Current taxes
    62,056       128,522       183,393  
Deferred
    (48,383 )     (23,715 )     (12,355 )
 
Total taxes on income
  $ 13,673     $ 104,807     $ 171,038  
Taxes (benefit) on discontinued operations
    939       921       (1,731 )
 
Taxes for continuing operations
  $ 12,734     $ 103,886     $ 172,769  
 
     Taxes of $33.8 million, $155.4 million and $185.3 million were paid in 2009, 2008 and 2007, respectively.
     Deferred taxes arise from temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. The sources of deferred tax assets and liabilities associated with these differences are:
                 
    August 31,
(in thousands)   2009   2008
 
Deferred tax assets:
               
Deferred compensation
  $ 56,703     $ 51,454  
Net operating losses (less allowances of $9,885 and $6,117)
    42,152       15,453  
Reserves and other accrued expenses
    18,722       27,546  
Allowance for doubtful accounts
    14,563       5,752  
Inventory
    10,115       5,934  
Impaired assets
    3,758       2,111  
Other
    18,809       3,914  
 
Deferred tax assets
  $ 164,822     $ 112,164  
 
Deferred tax liabilities:
               
Depreciation
  $ 87,709     $ 53,413  
Deferred revenue
    1,673       2,434  
Earnings of non-U.S. subsidiaries included in U.S. provision
          31,174  
Other
    9,717       8,533  
 
Deferred tax liabilities
  $ 99,099     $ 95,554  
 
Net deferred tax asset
  $ 65,723     $ 16,610  
 
     Amounts recognized in the consolidated balance sheets consist of:
                 
    August 31,
(in thousands)   2009   2008
 
Deferred tax asset — current
  $ 61,142     $ 32,170  
Deferred tax asset — long-term
    49,145       34,709  
Deferred liability — current
          109  
Deferred tax liability — long-term
    44,564       50,160  
 
Net deferred tax asset
  $ 65,723     $ 16,610  
 
     The Company uses substantially the same depreciable lives for tax and book purposes. Changes in deferred taxes relating to depreciation are mainly attributable to differences in the basis of underlying assets recorded under the purchase method of accounting and the use of accelerated depreciation in the United States.
     The tax benefits of net operating losses consist of $10.5 million of state net operating losses that expire during the tax years ending from 2011 to 2029 and foreign net operating losses of $41.5 million that expire during the tax years from 2010 to 2015. These assets will be reduced as tax expense is recognized in future periods.

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     In prior periods, the Company has provided United States taxes on unremitted foreign earnings except for its operations in Poland, Croatia, and Australia. As of August 31, 2009 it is the Company’s intention to indefinitely reinvest all undistributed earnings of non-U.S. subsidiaries, which amounts to approximately $407 million dollars. Accordingly, the deferred income tax liability related to prior periods has been reversed.
     Reconciliations of the United States statutory rates to the effective rates are as follows:
                         
    Year ended August 31,
    2009   2008   2007
 
Statutory rate
    35.0 %     35.0 %     35.0 %
State and local taxes
    33.3       2.5       1.6  
Section 199 manufacturing deduction
    (9.8 )     (1.0 )     (0.6 )
Foreign rate differential
    77.7       (5.7 )     (4.1 )
Reversal of prior period liability for non-US earnings
    (86.9 )            
Other
    (9.0 )     0.3        
 
Effective tax rate
    40.3 %     31.1 %     31.9 %
 
     The negative impact of state and local taxes on the effective tax rate is exaggerated due to the high percentage of income earned in the United States compared to non-U.S, locations. The negative impact of foreign tax rates is due to losses generated in low tax jurisdictions. Significant items included in the category of “Other” are reductions in tax expense due to a Federal tax refund and reductions in the Company’s FIN 48 reserve balance, along with a non deductible item related to the employee stock purchase plan.
     As a result of the implementation of FIN 48, the Company recognized an asset of $0.8 million and an increase to reserves of $5.8 million related to uncertain tax positions, including $1.6 million in interest and penalties, which were accounted for as a net reduction to the September 1, 2007 balance of retained earnings of $5 million. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
         
    (in thousands)
 
Balance September 1, 2008
  $ 4,223  
Additions based on tax positions related to current year
     
Reductions for tax positions of prior years
    (1,426 )
Reductions due to settlements with taxing authorities
    (122 )
Reductions due to statute of limitations lapse
    (1,143 )
 
Balance August 31, 2009
  $ 1,532  
 
     As of August 31, 2009, no additional uncertain tax positions had been identified. The current Company policy classifies any interest recognized on an underpayment of income taxes as interest expense and classifies any statutory penalties recognized on a tax position taken as selling, general and administrative expense and the balances at the end of a reporting period are recorded as part of the current or non-current reserve for uncertain income tax positions. If these tax positions were recognized, the impact on the effective tax rate would not be significant. The Company does not expect the total amounts of unrecognized benefits to significantly increase or decrease within the next 12 months.
     The Company files income tax returns in the United States and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, the Company and its subsidiaries are subject to examination by various taxing authorities. The following is a summary of tax years subject to examination:
U.S Federal — 2006 and forward
U.S. States — 2005 and forward
Foreign — 2002 and forward
     The federal tax returns for fiscal years 2006 to 2008 are under examination by the Internal Revenue Service (“IRS”). However, we believe our recorded tax liabilities as of August 31, 2009 sufficiently reflect the anticipated outcome of these examinations.
NOTE 10. CAPITAL STOCK
     During 2009, 2008 and 2007, the Company purchased 1,752,900, 6,212,238 and 2,116,975 common shares for treasury, respectively. The Company’s board of directors authorized the purchase of an additional 5,000,000 shares

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on November 5, 2007 and 10,000,000 shares on October 21, 2008 and the Company had remaining authorization to purchase 8,259,647 of its common stock as of August 31, 2009.
      Stock Purchase Plan Almost all U.S. resident employees with one year of service at the beginning of each calendar year may participate in the Company’s employee stock purchase plan. Each eligible employee may purchase up to 400 shares annually. The Board of Directors establishes the purchase discount from the market price. The discount was 25% for each of the three years ended August 31, 2009, 2008 and 2007. Yearly activity of the stock purchase plan was as follows:
                         
    2009   2008   2007
 
Shares subscribed
    1,234,080       489,510       497,520  
Price per share
  $ 7.94     $ 23.48     $ 21.86  
Shares purchased
    7,530       441,770       704,220  
Price per share
  $ 9.90     $ 21.69     $ 12.72  
Shares available for future issuance
    108,574                  
     The Company recorded compensation expense for this plan of $3.2 million, $3.4 million and $3.2 million in 2009, 2008 and 2007, respectively.
Stock Incentive Plans
     The 2006 Long-Term Equity Incentive Plan (“2006 Plan”) was approved by shareholders on January 25, 2007. Under the 2006 Plan, stock options, SARs, restricted stock and performance-based restricted units (“PSUs”) may be awarded to employees and provides that 5,000,000 shares are reserved for future awards. For grants made during the years ended August 31, 2008 and 2007, options, SARs and restricted stock vest over a three-year period in increments of one-third. For grants of PSUs made during the year ended August 31, 2009, such PSUs vest as described below. Options and SARs expire seven years after the grant date. All awards are valued at the fair market value at the date of grant.
     On May 19, 2009, The Compensation Committee (the “Committee”) of the Board of Directors of the Company approved an award of PSUs which upon vesting would result in the issuance of 403,000 shares of common stock. The awards vest upon the following performance conditions: (i) for 20 consecutive trading days between the date of grant and May 19, 2012, the closing price of the Company’s common stock is at least $30 per share and the Company ranks at or greater than the 50 th percentile on a total stockholder return basis as compared to its peer group with total stockholder return being based on the average of the closing prices for the month of December 2008 versus the average of the closing prices for the month of December 2011; or (ii) for 20 consecutive trading days between the date of grant and May 19, 2012, the closing price of the Company’s common stock is at least $24 per share and the Company ranks at or greater than the 80 th percentile on a total stockholder return basis as compared to its peer group with the total stockholder return based on the average of the closing prices for the month of December 2008 versus the average of the closing prices the month of December 2011. The determination of whether any vesting criteria have been met is to be made by the Committee. The unvested units will be forfeited on the earlier of the date of the participant’s termination of service or May 19, 2012.
     In January 2000, stockholders approved the 1999 Non-Employee Director Stock Option Plan (“1999 Plan”) and authorized 800,000 shares to be made available for option grants to non-employee directors. The price of these options is the fair market value of the Company’s stock at the date of the grant. The options granted vest 50% after one year and 50% after two years from the grant date. Under the 1999 Plan, any outside director could elect to receive all or part of fees otherwise payable in the form of a stock option. Options granted in lieu of fees are immediately vested. All options expire seven years from the date of grant. The 1999 Plan was amended with stockholder approval in January 2005 and 2007 in order to provide annual grants of either non-qualified options, restricted stock or restricted stock units to non-employee directors. This annual award can either be in the form of a nonqualified stock option or SAR grant for 14,000 shares or a restricted stock or unit award of 4,000 shares. On January 22, 2009, the Company issued SARs which are exercisable into 126,000 shares of common stock to nine non-employee directors. SARs vest over a two-year period. Prior to vesting, restricted stock award recipients receive an amount equivalent to any dividend declared on the Company’s common stock.

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     Combined information for shares subject to options and SARs for the plans were as follows:
                         
            Weighted    
            Average   Price
            Exercise   Range
    Number   Price   Per Share
 
September 1, 2006
                       
Outstanding
    7,485,348     $ 8.06     $ 2.75-24.71  
Exercisable
    6,178,200       5.90       2.75-13.58  
Granted
    1,403,520       34.28       31.75-34.28  
Exercised
    (2,380,238 )     5.28       2.75-24.57  
Forfeited
    (27,722 )     13.44       2.94-24.57  
 
August 31, 2007
                       
Outstanding
    6,480,908     $ 14.74     $ 2.94-34.28  
Exercisable
    4,333,089       7.65       2.94-24.71  
Granted
    1,062,670       35.37       32.82-35.38  
Exercised
    (1,247,477 )     7.24       2.94-34.28  
Forfeited
    (74,695 )     29.97       12.31-35.38  
 
August 31, 2008
                       
Outstanding
    6,221,406     $ 19.60     $ 3.64-35.38  
Exercisable
    4,057,115       11.96       3.64-34.28  
Granted
    126,000       11.00       11.00  
Exercised
    (813,271 )     5.00       3.64-12.31  
Forfeited
    (106,583 )     30.85       7.78-35.38  
 
August 31, 2009
                       
Outstanding
    5,427,552     $ 21.36     $ 3.64-35.38  
Exercisable
    4,240,734       18.27       3.64-35.38  
Share information for options and SARs at August 31, 2009:
                                                                 
Outstanding   Exercisable
                    Weighted                            
                    Average   Weighted                   Weighted    
Range of               Remaining   Average   Aggregate           Average   Aggregate
Exercise       Number   Contractual   Exercise   Intrinsic   Number   Exercise   Intrinsic
Price       Outstanding   Life (Years)   Price   Value   Outstanding   Price   Value
 
$ 3.64 - 3.78    
 
    462,392       0.4     $ 3.65               462,392     $ 3.65          
  7.53 - 7.78    
 
    1,266,692       1.5       7.76               1,266,692       7.76          
  11.00 - 13.58    
 
    818,761       3.3       12.13               692,761       12.34          
  21.81 - 24.71    
 
    547,310       3.5       24.52               547,310       24.52          
  31.75 - 35.38    
 
    2,332,397       5.0       34.76               1,271,579       34.60          
 
$ 3.64 - 35.38    
 
    5,427,552       3.4     $ 21.36     $ 21,679,852       4,240,734     $ 18.27     $ 20,932,672  
 
     Information for restricted stock awards as of August 31, 2009, 2008 and 2007 and changes during each of the three years then ended:
                 
            Weighted Average
            Grant - Date
    Shares   Fair Value
 
September 1, 2006
    636,967     $ 17.86  
Granted
    206,482       32.93  
Vested
    (280,859 )     16.72  
Forfeited
    (8,166 )     18.27  
 
August 31, 2007
    554,424     $ 24.04  
 
 
               
Granted
    163,770     $ 32.90  
Vested
    (327,030 )     20.42  
Forfeited
    (18,178 )     24.30  
 
August 31, 2008
    372,986     $ 31.09  
 
 
               
Granted
    403,000     $ 8.89  
Vested
    (213,767 )     29.32  
Forfeited
    (12,619 )     33.20  
 
August 31, 2009
    549,600     $ 15.45  
 

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     At August 31, 2009, the Company has 2,459,893 shares available for future grants of options, SARs and restricted stock.
      Preferred Stock Preferred stock has a par value of $1.00 a share, with 2,000,000 shares authorized. It may be issued in series, and the shares of each series shall have such rights and preferences as fixed by the Board of Directors when authorizing the issuance of that particular series. There are no shares of preferred stock outstanding.
      Stockholder Rights Plan On July 28, 2009, the Company’s stockholder rights plan expired.
NOTE 11. EMPLOYEES’ RETIREMENT PLANS
     Substantially all employees in the U.S. are covered by a defined contribution profit sharing and savings plan. This tax qualified plan is maintained and contributions made in accordance with ERISA. The Company also provides certain eligible executives’ benefits pursuant to a nonqualified benefit restoration plan (“BRP Plan”) equal to amounts that would have been available under the tax qualified ERISA plans, save for limitations of ERISA, tax laws and regulations. Company expenses, which are discretionary, for these plans were $20.8 million, $55.1 million and $70.8 million for 2009, 2008 and 2007, respectively.
     The deferred compensation liability under the BRP Plan was $96.9 million and $93.0 million at August 31, 2009 and 2008, respectively, and recorded in other long-term liabilities. Though under no obligation to fund the plan, the Company has segregated assets in a trust with a current value at August 31, 2009 and 2008 of $55.6 million and $74.0 million, respectively, recorded in other long-term assets. The net holding gain (loss) on these segregated assets was $(12.2) million, $(6.5) million and $8.2 million for the years ended August 31, 2009, 2008 and 2007, respectively.
     A certain number of employees outside of the U.S. participate in defined contribution plans maintained in accordance with local regulations. Company expenses for these international plans were $2.4 million, $4.3 million and $3.8 million for the years ended August 31, 2009, 2008 and 2007, respectively.
     The Company provides and recognizes post retirement defined benefits to employees at certain divisions in accordance with SFAS No. 158, Employers Accounting for Defined Benefit Pensions and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R (“SFAS 158”). SFAS 158 requires the Company to recognize the unfunded status of defined benefit plans as a liability with a corresponding reduction to accumulated other comprehensive income, net of taxes. On August 31, 2007, the Company adopted the provisions of SFAS 158 and recognized the $0.9 million unfunded status of defined benefit plans as a liability with a corresponding reduction of $0.8 million to accumulated other comprehensive income, net of taxes. During 2009 and 2008, the Company recorded an additional liability of $0.5 million and $1.5 million, respectively, and a corresponding reduction to accumulated other comprehensive income, net of taxes of $0.4 million and $1.1 million, respectively, related to the unfunded status of the Company’s defined benefit plans.
NOTE 12. COMMITMENTS AND CONTINGENCIES
     Minimum lease commitments payable by the Company and its consolidated subsidiaries for noncancelable operating leases in effect at August 31, 2009, are as follows:
                 
            Real
(in thousands)   Equipment   Estate
 
2010
  $ 16,500     $ 24,430  
2011
    13,545       19,946  
2012
    10,566       18,809  
2013
    6,686       14,968  
2014 and thereafter
    2,635       44,150  
 
 
  $ 49,932     $ 122,303  
 
     Total rental expense was $68.4 million, $63.7 million and $36.1 million in 2009, 2008 and 2007, respectively.

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Legal and Environmental Matters
     In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and government investigations, including environmental matters.
     On September 18, 2008, the Company was served with a class action antitrust lawsuit alleging violations of Section 1 of the Sherman Act, brought by Standard Iron Works of Scranton, Pennsylvania, against nine steel manufacturing companies, including Commercial Metals Company. The lawsuit, filed in the United States District Court for the Northern District of Illinois, alleges that the defendants conspired to fix, raise, maintain and stabilize the price at which steel products were sold in the United States by artificially restricting the supply of such steel products. The lawsuit, which purports to be brought on behalf of a class consisting of all purchasers of steel products directly from the defendants between January 1, 2005 and the present, seeks treble damages and costs, including reasonable attorney fees and pre- and post-judgment interest. Since the filing of this lawsuit, additional plaintiffs have filed class action lawsuits naming the same defendants and containing allegations substantially identical to those of the Standard Iron Works complaint. The Company believes that the lawsuits are entirely without merit and plans to aggressively defend the actions.
     The Company has received notices from the U.S. Environmental Protection Agency (“EPA”) or equivalent state agency that it is considered a potentially responsible party (“PRP”) at ten sites, none owned by the Company, and may be obligated under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) or similar state statute to conduct remedial investigations, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. The Company is involved in litigation or administrative proceedings with regard to several of theses sites in which the Company is contesting, or at the appropriate time may contest, its liability at the sites. In addition, the Company has received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Some of these environmental matters or other proceedings may result in fines, penalties or judgments being assessed against the Company. At August 31, 2009 and 2008, the Company had $2.2 million and $2.2 million, respectively, accrued for cleanup and remediation costs in connection with eight of the ten CERCLA sites. The estimation process is based on currently available information, which is in many cases preliminary and incomplete. As a result, the Company is unable to reasonably estimate an amount relating to cleanup and remediation costs for two CERCLA sites. Total environmental liabilities, including CERCLA sites, were $14.3 million and $14.7 million, of which $6.4 million and $6.8 million were classified as other long-term liabilities, at August 31, 2009 and 2008, respectively. Due to evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process and other factors, amounts accrued could vary significantly from amounts paid. Historically, the amounts the Company has ultimately paid for such remediation activities have not been material.
     Management believes that adequate provision has been made in the financial statements for the potential impact of these issues, and that the outcomes will not significantly impact the results of operations or the financial position of the Company, although they may have a material impact on earnings for a particular quarter.
      Guarantees In February 2007, the Company entered into a guarantee agreement with a bank in connection with a credit facility granted by the bank to a supplier of the Company. The fair value of the guarantee is negligible. As of August 31, 2009, the maximum credit facility with the bank was $80 million and the maximum Company exposure was $2.1 million.
NOTE 13. EARNINGS PER SHARE
     In calculating earnings per share, there were no adjustments to net earnings to arrive at earnings for any years presented. The reconciliation of the denominators of the earnings per share calculations are as follows at August 31:
                         
    2009   2008   2007
 
Shares outstanding for basic earnings per share
    112,391,180       115,048,512       118,014,149  
Effect of dilutive securities:
                       
Stock-based incentive/purchase plans
    1,489,195       2,637,241       3,667,581  
 
Shares outstanding for diluted earnings per share
    113,880,375       117,685,753       121,681,730  
 

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     All of the Company’s outstanding stock options and restricted stock were dilutive at August 31, 2009, 2008 and 2007 based on the average share price of $16.62, $32.55 and $32.16, respectively. SARs with total share commitments of 2,879,707 and 2,414,027 were antidilutive at August 31, 2009 and 2008. All of the Company’s SARs were dilutive at August 31, 2007. All stock options and SARs expire by 2016.
     The Company’s restricted stock is included in the number of shares of common stock issued and outstanding, but omitted from the basic earnings per share calculation until the shares vest.
NOTE 14. ACCRUED EXPENSES AND OTHER PAYABLES
                 
    August 31,
(in thousands)   2009   2008
 
Salaries, bonuses and commissions
  $ 67,425     $ 198,000  
Advance billings on contracts
    47,253       60,918  
Freight
    34,007       50,630  
Contract losses
    24,492       41,206  
Taxes other than income taxes
    20,030       5,535  
Insurance
    17,540       13,683  
Derivative liability
    16,771       28,447  
Interest
    9,875       10,869  
Environmental
    8,088       7,894  
Litigation accruals
    6,879       6,828  
Employees’ retirement plans
    2,941       51,750  
Other
    71,911       87,664  
 
 
  $ 327,212     $ 563,424  
 
NOTE 15. BUSINESS SEGMENTS
     The Company’s reportable segments are based on strategic business areas, which offer different products and services. These segments have different lines of management responsibility as each business requires different marketing strategies and management expertise.
     The Company structures the business into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication and Distribution, International Mills and International Fabrication and Distribution.
     The Americas Recycling segment consists of the scrap metal processing and sales operations primarily in Texas, Florida and the southern United States including the scrap processing facilities which directly support the Company’s domestic steel mills. The Americas Mills segment includes the Company’s domestic steel minimills and the copper tube minimill. The copper tube minimill is aggregated with the Company’s steel minimills because it has similar economic characteristics. The Americas Fabrication and Distribution segment consists of the Company’s rebar and joist and deck fabrication operations, fence post manufacturing plants, construction-related and other products facilities. Additionally, the Americas Fabrication and Distribution consists of the CMC Dallas Trading division which markets and distributes steel semi-finished long and flat products into the Americas from a diverse base of international and domestic sources. The International Mills segment includes the minimills in Poland and Croatia and subsidiaries in Poland which have been presented as a separate segment because the economic characteristics of their markets and the regulatory environment in which they operate are different from that of the Company’s domestic minimills. International Fabrication and Distribution includes international operations for the sales, distribution and processing of both ferrous and nonferrous metals and other industrial products in addition to rebar fabrication operations in Europe. The domestic and international distribution operations consist only of physical transactions and not positions taken for speculation. Corporate contains expenses of the Company’s corporate headquarters, expenses related to its deployment of SAP, and interest expense relating to its long-term public debt and commercial paper program.
     The financial information presented for the International Fabrication and Distribution segment includes its copper, aluminum, and stainless steel import operating division. This division has been classified as a discontinued operation in the consolidated financial statements. Net sales of this division have been removed in the eliminations/discontinued operations column in the table below to reconcile net sales by segment to net sales in the consolidated financial statements. See Note 5. for more detailed information.

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     The Company uses adjusted operating profit (loss) to measure segment performance. Intersegment sales are generally priced at prevailing market prices. Certain corporate administrative expenses are allocated to segments based upon the nature of the expense. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
     The following is a summary of certain financial information by reportable segment (in thousands):
                                                                 
    Americas   International                
                    Fabrication           Fabrication           Eliminations/    
                    and           and           Discontinued    
    Recycling   Mills   Distribution   Mills   Distribution   Corporate   Operations   Consolidated
 
2009
                                                               
Net sales-unaffiliated customers
  $ 625,858     $ 773,965     $ 2,516,229     $ 497,553     $ 2,480,437     $ (10,609 )   $ (90,037 )   $ 6,793,396  
Intersegment sales
    159,530       479,433       11,933       184,102       35,281             (870,279 )      
Net sales
    785,388       1,253,398       2,528,162       681,655       2,515,718       (10,609 )     (960,316 )     6,793,396  
Adjusted operating profit (loss)
    (89,576 )     263,393       111,604       (77,421 )     (4,341 )     (94,813 )     7,538       116,384  
Interest expense*
    198       (6,994 )     (996 )     1,894       6,864       76,596             77,562  
Capital expenditures
    28,281       122,719       18,637       143,040       20,606       36,411             369,694  
Depreciation and amortization**
    21,352       38,543       58,715       24,235       4,732       15,570             163,147  
Goodwill
    7,467       95       58,878       956       6,840                   74,236  
Total assets
    257,084       585,763       980,957       572,658       635,786       655,308             3,687,556  
 
 
                                                               
2008
                                                               
Net sales-unaffiliated customers
  $ 1,820,607     $ 1,387,290     $ 2,859,816     $ 970,923     $ 3,727,775     $ (1,855 )   $ (337,178 )   $ 10,427,378  
Intersegment sales
    369,112       578,980       14,778       184,748       53,141             (1,200,759 )      
Net sales
    2,189,719       1,966,270       2,874,594       1,155,671       3,780,916       (1,855 )     (1,537,937 )     10,427,378  
Adjusted operating profit (loss)
    145,751       207,756       (67,471 )     96,838       124,338       (99,481 )     133       407,864  
Interest expense*
    (5,426 )     (10,329 )     25,029       9,406       13,563       27,245             59,488  
Capital expenditures
    52,299       78,319       45,545       106,356       10,715       61,807             355,041  
Depreciation and amortization
    19,129       35,340       39,906       28,207       3,962       8,525             135,069  
Goodwill
    7,467             68,398       1,176       7,796                   84,837  
Total assets
    435,008       630,612       1,447,767       634,027       1,167,020       431,937             4,746,371  
 
 
                                                               
2007
                                                               
Net sales-unaffiliated customers
  $ 1,550,014     $ 1,144,869     $ 2,580,880     $ 737,066     $ 2,727,502     $ 10,821     $ (422,136 )   $ 8,329,016  
Intersegment sales
    250,633       394,794       5,896       40,142       35,040             (726,505 )      
Net sales
    1,800,647       1,539,663       2,586,776       777,208       2,762,542       10,821       (1,148,641 )     8,329,016  
Adjusted operating profit (loss)
    113,037       259,368       100,032       112,379       73,709       (71,971 )     (7,627 )     578,927  
Interest expense*
    (6,021 )     (15,685 )     27,413       1,140       14,418       15,992             37,257  
Capital expenditures
    26,023       79,027       33,433       30,325       5,844       31,610             206,262  
Depreciation and amortization
    16,425       32,332       29,089       25,390       2,659       1,410             107,305  
Goodwill
    7,467             28,484             1,892                   37,843  
Total assets
    337,869       533,794       1,053,594       332,084       698,232       517,090           $ 3,472,663  
 
 
*   Includes intercompany interest expense (income) in the segments.
 
**   Includes asset impairment charges.
     The following table provides a reconciliation of consolidated adjusted operating profit to net earnings:
                         
    Year ended August 31,
(in thousands)   2009   2008   2007
 
Net earnings
  $ 20,802     $ 231,966     $ 355,431  
Minority interests (benefit)
    (550 )     538       9,587  
Income taxes
    13,673       104,807       171,038  
Interest expense
    77,562       59,488       37,257  
Discounts on sales of accounts receivable
    4,897       11,065       5,614  
 
Adjusted operating profit
  $ 116,384     $ 407,864     $ 578,927  
Adjusted operating profit (loss) from discontinued operations
    2,628       2,949       (3,474 )
 
Adjusted operating profit from continuing operations
  $ 113,756     $ 404,915     $ 582,401  
 

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     The following represents the Company’s external net sales by major product and geographic area:
                         
    Year ended August 31,
(in thousands)   2009   2008   2007
 
Major product information:
                       
Steel products
  $ 4,713,749     $ 6,594,553     $ 5,274,686  
Industrial materials
    885,333       1,247,907       773,859  
Nonferrous scrap
    411,503       1,006,602       1,106,669  
Construction materials
    288,707       327,732       265,654  
Ferrous scrap
    260,755       861,106       448,999  
Nonferrous products
    150,461       273,790       376,563  
Other
    82,888       115,688       82,586  
 
Net sales*
  $ 6,793,396     $ 10,427,378     $ 8,329,016  
 
 
Geographic area:
                       
United States
  $ 4,059,197     $ 5,833,116     $ 4,932,097  
Europe
    1,272,621       2,399,859       1,720,771  
Asia
    727,681       955,800       918,483  
Australia/New Zealand
    533,528       636,763       472,583  
Other
    200,369       601,840       285,082  
 
Net sales*
  $ 6,793,396     $ 10,427,378     $ 8,329,016  
 
 
*   Excludes a division classified as discontinued operations. See Note 5.
     The following represents long-lived assets by geographic area:
                         
    Year ended August 31,
(in thousands)   2009   2008   2007
 
United States
  $ 1,186,624     $ 1,132,775     $ 825,393  
Europe
    462,412       356,667       158,852  
Australia/New Zealand
    19,286       19,164       15,296  
Other
    21,682       20,322       14,270  
 
Total long-lived assets
  $ 1,690,004     $ 1,528,928     $ 1,013,811  
 
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
     Summarized quarterly financial data for fiscal 2009, 2008 and 2007 are as follows (in thousands except per share data):
                                 
    Three Months Ended 2009
    Nov. 30   Feb. 28   May 31   Aug. 31
 
Net sales*
  $ 2,372,830     $ 1,618,170     $ 1,340,580     $ 1,461,816  
Gross profit*
    266,684       162,945       192,736       157,696  
Net earnings (loss)
    62,006       (35,307 )     (13,077 )     7,180  
Basic EPS
    0.55       (0.32 )     (0.12 )     0.06  
Diluted EPS
    0.54       (0.32 )     (0.12 )     0.06  
                                 
    Three Months Ended 2008
    Nov. 30   Feb. 29   May 31   Aug. 31
 
Net sales*
  $ 2,116,004     $ 2,254,168     $ 2,910,730     $ 3,146,476  
Gross profit*
    260,624       237,771       293,498       309,761  
Net earnings
    69,164       39,775       59,484       63,543  
Basic EPS
    0.59       0.35       0.52       0.56  
Diluted EPS
    0.57       0.34       0.51       0.55  
                                 
    Three Months Ended 2007
    Nov. 30   Feb. 28   May 31   Aug. 31
 
Net sales*
  $ 1,892,719     $ 1,908,314     $ 2,244,041     $ 2,283,942  
Gross profit*
    287,537       252,077       313,210       308,203  
Net earnings
    85,350       65,921       99,441       104,719  
Basic EPS
    0.73       0.56       0.84       0.88  
Diluted EPS
    0.71       0.54       0.82       0.86  

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*   Excludes the operations of a division classified as discontinued operations. See Note 5.
NOTE 17. RELATED PARTY TRANSACTIONS
     One of the Company’s international subsidiaries has a marketing and distribution agreement with a key supplier of which the Company owns an 11% interest. The following presents related party transactions:
                         
    Year ended August 31,
(in thousands)   2009   2008   2007
 
Sales
  $ 275,012     $ 396,739     $ 311,968  
Purchases
    338,877       420,909       381,779  
                 
    Year ended August 31,
(in thousands)   2009   2008
 
Accounts Receivable
  $ 12,664     $ 46,594  
Accounts Payable
    17,012       35,314  
NOTE 18. SUBSEQUENT EVENTS
     In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events after the balance sheet date but before financial statements are issued or are available to be issued. The adoption in the fourth quarter of 2009 did not have any material impact on the Company’s consolidated financial statements. Accordingly, the Company evaluated subsequent events through October 30, 2009, the date the consolidated financial statements were issued.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
     Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
     (a)  Evaluation of Disclosure Controls and Procedures. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods, including controls and disclosures designed to ensure that this information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, and they have concluded that as of that date, our disclosure controls and procedures were effective.
     (b)  Management’s Report on Internal Control Over Financial Reporting. Management concluded that, as of August 31, 2009, our internal control over financial reporting was effective. Our Management’s Report on Internal Control Over Financial Reporting, as of August 31, 2009, can be found on page 42 of this Form 10-K, and the related Report of Our Independent Registered Public Accounting Firm, Deloitte & Touche LLP, on Internal Control Over Financial Reporting can be found on page 43 of this Form 10-K, each of which is incorporated by reference into this Item 9A.
     (c)  Changes in Internal Control Over Financial Reporting . During the fourth quarter of 2009, the Company implemented SAP at certain domestic fabrication divisions in connection with the Company-wide rollout of SAP which was initiated in the second quarter of fiscal year 2008. The implementation resulted in modifications to internal controls over the related accounting and operating processes at these locations and for these functions. We evaluated the control environment as affected by the implementation and believe our controls remained effective. We intend to implement SAP globally to most business segments within the next several years. Other than the changes mentioned above, no other changes to our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over our financial reporting.

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ITEM 9B. OTHER INFORMATION
     Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
     Some of the information required in response to this item with regard to directors is incorporated by reference into this annual report from our definitive proxy statement for the annual meeting of stockholders to be held January 28, 2010, which will be filed no later than 120 days after the close of our fiscal year. The following is a listing of employees we believe to be our “Executive Officers” as of October 26, 2009, as defined under Rule 3b-7 of the Securities Exchange Act of 1934:
                     
NAME   CURRENT TITLE & POSITION   AGE   OFFICER SINCE
Ann J. Bruder
  Vice President, General Counsel and Corporate Secretary     44       2009  
Louis A. Federle
  Treasurer     61       1979  
William B. Larson
  Senior Vice President and Chief Financial Officer     56       1995  
Murray R. McClean
  President, Chief Executive Officer and Chairman of the Board of Directors     61       1995  
Malinda G. Passmore
  Vice President and Chief Information Officer     51       1999  
Russell B. Rinn
  President CMC Americas     51       2002  
Leon K. Rusch
  Controller     58       2006  
Hanns Zoellner
  President CMC International     61       2004  
     Our board of directors usually elects officers at its first meeting after our annual stockholders meeting. Our executive officers continue to serve for terms set from time to time by the board of directors in its discretion.
     Effective September 1, 2008 Mr. McClean was elected Chairman of the Board of Directors. In July, 2006, Mr. McClean was elected a director and on September 1, 2006, was appointed Chief Executive Officer. Mr. McClean served as President and Chief Operating Officer from September 20, 2004 to September 1, 2006. Mr. McClean continues in his capacity as President in addition to his positions as Chief Executive Officer and Chairman of the Board of Directors. Messer’s Rinn and Zoellner were promoted to their respective positions effective September 1, 2007. Mr. Rinn had previously been President of the CMC Steel Group and an officer since 2002 having been employed by CMC since 1979. Mr. Zoellner replaced Mr. McClean in 2004 as President of the Marketing and Distribution Segment. Mr. Zoellner had previously served as President of the International Division — Europe, having been employed by the division initially in 1981 and continuously since 1991. Leon K. Rusch was named Controller of the Company in 2006. Mr. Rusch replaced Malinda G. Passmore who was appointed to the position of Vice President and Chief Information Officer of the Company in 2006. Ms. Passmore had previously served as Controller of the Company since 1999. Mr. Rusch joined the Company in December 2003 as Director of Internal Audit. Effective September 1, 2009, Ms. Bruder was appointed Vice President, General Counsel and Corporate Secretary. Prior to such appointment, Ms. Bruder served as Deputy General Counsel since joining the Company on September 17, 2007. Ms. Bruder had previously been employed from January, 2004 to August, 2007 at CARBO Ceramics, Inc. as Chief Counsel, Chief Compliance Officer, and Corporate Secretary. We have employed all of our other executive officers in the positions indicated above or in positions of similar responsibility for more than five years. There are no family relationships among our officers or among the executive officers and directors.
     We have adopted a Financial Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Corporate Controller and any of our other officers that may function as a Chief Accounting Officer. We intend to post any amendments to or waivers from our Financial Code of Ethics on our website (www.cmc.com) to the extent applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, any other officer that may function as a Chief Accounting Officer. We hereby undertake to provide to any person without charge, upon request, a copy of our Financial Code of Ethics. Requests may be directed to Commercial Metals Company, 6565 N. MacArthur Blvd., Suite 800, Irving, Texas 75039, Attention: Corporate Secretary, or by calling (214) 689-4300.

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ITEM 11. EXECUTIVE COMPENSATION
     Information required in response to this Item 11 is incorporated by reference into this annual report from our definitive proxy statement for the annual meeting of stockholders to be held January 28, 2010. We will file our definitive proxy statement no later than 120 days after the close of our fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
     The information required in response to this Item 12 is incorporated by reference into this annual report from our definitive proxy statement for the annual meeting of stockholders to be held January 28, 2010. We will file our definitive proxy statement no later than 120 days after the close of our fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
     To the extent applicable, information required in response to this Item 13 is incorporated by reference into this annual report from our definitive proxy statement for the annual meeting of stockholders to be held January 28, 2010. We will file our definitive proxy statement no later than 120 days after the close of our fiscal year.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
     The information required in response to this Item 14 is incorporated by reference into this annual report from our definitive proxy statement for the annual meeting of stockholders to be held January 28, 2010. We will file our definitive proxy statement no later than 120 days after the close of our fiscal year.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)   The following documents are filed as a part of this report:
 
1.   All financial statements are included at Item 8 above.
 
2.   Financial statement schedule: The following financial statement schedule is attached to this report.
 
         Schedule II — Valuation and Qualifying Accounts and Reserves
 
    All other financial statement schedules have been omitted because they are not applicable, are not required, or the required information is shown in the financial statements or notes thereto.
 
3.   The following is a list of the Exhibits required to be filed by Item 601 of Regulation S-K:
     
EXHIBIT    
NO.   DESCRIPTION
1(a)
  Underwriting Agreement, dated July 30, 2008 among Commercial Metals Company and Banc of America Securities LLC and J.P. Morgan Securities Inc., as Representatives of the several underwriters named therein (filed as Exhibit 1.1 to Commercial Metals’ Form 8-K filed August 5, 2008 and incorporated herein by reference).
 
   
3(i)
  Restated Certificate of Incorporation (filed herewith).
 
   
3(i)(a)
  Certificate of Amendment of Restated Certificate of Incorporation dated February 1, 1994 (filed herewith).
 
   
3(i)(b)
  Certificate of Amendment of Restated Certificate of Incorporation dated February 17, 1995 (filed herewith).
 
   
3(i)(c)
  Certificate of Amendment of Restated Certificate of Incorporation dated January 26, 2006 (filed as Exhibit 3(i) to Commercial Metals’ Form 10-Q for the quarter ended February 28, 2006 and incorporated herein by reference).

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EXHIBIT    
NO.   DESCRIPTION
3(i)(d)
  Certificate of Designation, Preferences and Rights of Series A Preferred Stock (filed as Exhibit 2 to Commercial Metals’ Form 8-A filed August 3, 1999 and incorporated herein by reference).
 
   
3(ii)
  Amended and Restated Bylaws (filed herewith).
 
   
4(i)(a)
  Indenture between Commercial Metals and Chase Manhattan Bank dated as of July 31, 1995 (filed as Exhibit 4.1 to Commercial Metals’ Registration Statement No. 33-60809 on July 18, 1995 and incorporated herein by reference).
 
   
4(i)(b)
  Form of Note for Commercial Metals’ 5.625% Senior Notes due 2013 (filed as Exhibit 4(i)(j) to Commercial Metals’ Registration Statement No. 33-112243 on January 27, 2004 and incorporated herein by reference).
 
   
4(i)(c)
  Form of Note for Commercial Metals’ 6.50% Senior Notes due 2017 (filed as Exhibit 4(i)e to Commercial Metals’ Form 10-K for the fiscal year ended August 31, 2007 and incorporated herein by reference).
 
   
4(i)(d)
  Form of Note for Commercial Metals’ 7.35% Senior Notes due 2018 (filed as Exhibit 4(i)(g) to Commercial Metals’ Form 10-K for the fiscal year ended August 31, 2008 and incorporated herein by reference).
 
   
4(i)(e)**
  Supplemental Indenture, dated as of November 12, 2003, to Indenture dated as of July 31, 1995, by and between Commercial Metals and JPMorgan Chase Bank (filed herewith).
 
   
4(i)(f)**
  Supplemental Indenture, dated as of July 17, 2007, to Indenture dated as of July 31, 1995, by and between Commercial Metals and The Bank of New York Trust Company, N. A. (filed as Exhibit 4.1 to Commercial Metals’ Form 8-K filed July 17, 2007 and incorporated herein by reference).
 
   
4(i)(g)**
  Supplemental Indenture, dated as of August 4, 2008, to Indenture dated as of July 31, 1995, by and between Commercial Metals and The Bank of New York Mellon Trust Company, N. A. (filed as Exhibit 4.1 to Commercial Metals’ Form 8-K filed August 5, 2008 and incorporated herein by reference).
 
   
10(i)(a)
  Purchase and Sale Agreement dated June 20, 2001, between various entities listed on Schedule 1 as Originators and CMC Receivables, Inc. (filed herewith).
 
   
10(i)(b)
  Second Amended and Restated Receivables Purchase Agreement dated as of April 30, 2008, among CMC Receivables, Inc., as Seller, Liberty Street Funding LLC as a Buyer, Gotham Funding Corporation, as a Buyer,,The Bank of Nova Scotia as a Managing Agent, and the Administrative Agent, The Bank of Tokyo-Mitsubishi UFJ, LTD., New York Branch, as a Managing Agent, and Commercial Metals Company as Servicer (filed as Exhibit 10.1 to Commercial Metals’ Form 8-K filed May 2, 2008 and incorporated herein by reference).
 
   
10(i)(c)
  Amendment to Purchase and Sale Agreement dated April 22, 2004, among CMC Receivables, Inc., CMC Steel Fabricators, Inc., Commercial Metals Company, Howell Metal Company, Owen Electric Steel Company of South Carolina, SMI Steel Inc. and Structural Metals, Inc. (filed herewith).
 
   
10(i)(d)
  Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated April 24, 2009,among CMC Receivables Inc., the Company, Liberty Street Funding LLC, Gotham Funding Corporation, The Bank of Nova Scotia and The Bank of Tokyo-Mitsubishi UFJ, LTD., New York Branch (filed as Exhibit 10.1 to Commercial Metals’ Form 8-K filed April 28, 2009 and incorporated herein by reference).
 
   
10(i)(e)
  Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated May 26, 2009, among CMC Receivables Inc., the Company, Liberty Street Funding LLC, Gotham Funding Corporation, The Bank of Nova Scotia and The Bank of Tokyo-Mitsubishi UFJ, LTD., New York Branch (filed as Exhibit 10.1 to Commercial Metals’ Form 8-K filed May 26, 2009 and incorporated herein by reference).

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EXHIBIT    
NO.   DESCRIPTION
10(i)(f)
  Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated June 12, 2009, among CMC Receivables Inc., the Company, Liberty Street Funding LLC, Gotham Funding Corporation, The Bank of Nova Scotia and The Bank of Tokyo-Mitsubishi UFJ, LTD., New York Branch (filed as Exhibit 10.1 to Commercial Metals’ Form 8-K filed June 15, 2009 and incorporated herein by reference).
 
   
10(i)(g)
  First Amended and Restated $400,000,000 3 Year Credit Agreement, dated May 23, 2005, by and among Commercial Metals, Bank of America, N.A., The Bank of Tokyo-Mitsubishi, Ltd., ABN AMRO Bank N.V., Mellon Bank, N.A., BNP Paribas, Banc of America Securities LLC and the other lending parties listed therein (filed as Exhibit 10.4 to Commercial Metals’ Form 8-K filed May 26, 2005 and incorporated herein by reference).
 
   
10(iii)(a)*
  Employment Agreement of Murray R. McClean dated May 23, 2005 (filed as Exhibit 10.1 to Commercial Metals’ Form 8-K filed May 26, 2005 and incorporated herein by reference).
 
   
10(iii)(b)*
  First Amendment to Employment Agreement of Murray R. McClean, dated September 1, 2006 (filed as Exhibit 99.1 to Commercial Metals’ Form 8-K filed September 1, 2006 and incorporated herein by reference).
 
   
10(iii)(c)*
  Second Amendment to Employment Agreement of Murray R. McClean, dated April 7, 2009 (filed as Exhibit 10.1 to Commercial Metals Form 10-Q filed April 8, 2009 and incorporated herein by reference.
 
   
10(iii)(d)*
  Key Employee Long-Term Performance Plan description (filed herewith).
 
   
10(iii)(e)*
  Key Employee Annual Incentive Plan description (filed herewith).
 
   
10(iii)(f)*
  Amended and Restated 1999 Non-Employee Director Stock Option Plan (filed as Exhibit 10(iii)(a) to Commercial Metals’ Form 10-Q for the quarter ending February 28, 2007 and incorporated herein by reference).
 
   
10(iii)(g)*
  Employment Agreement between Commercial Metals (International) AG and Hanns Zoellner dated January 2, 1998 (filed herewith).
 
   
10(iii)(h)*
  Commercial Metals Company 1996 Long-Term Incentive Plan (filed as Exhibit 10.1 to Commercial Metals’ Form 10-Q for the quarter ending February 28, 2005 and incorporated herein by reference).
 
   
10(iii)(i)*
  Commercial Metals Company 2006 Long-Term Equity Incentive Plan (filed as Exhibit 10(iii)(b) to Commercial Metals’ Form 10-Q for the quarter ending February 28, 2007 and incorporated herein by reference).
 
   
10(iii)(j)*
  Form of Commercial Metals Company 1996 Long-Term Incentive Plan Restricted Stock Award Agreement (filed as Exhibit 10.2 to Commercial Metals’ Form 8-K filed May 26, 2005 and incorporated herein by reference).
 
   
10(iii)(k)*
  Form of Commercial Metals Company 1996 Long-Term Incentive Plan Stock Appreciation Rights Agreement (filed as Exhibit 10.3 to Commercial Metals’ Form 8-K filed May 26, 2005 and incorporated herein by reference).
 
   
10(iii)(l)*
  Commercial Metals Company 2006 Cash Incentive Plan (filed as Exhibit 10(iii)(c) to Commercial Metals’ Form 10-Q for the quarter ending February 28, 2007 and incorporated herein by reference).
 
   
10(iii)(m)*
  Form of Non-Employee Director Restricted Stock Award Agreement (filed as Exhibit 10.1 to Commercial Metals’ Form 8-K filed January 27, 2005 and incorporated herein by reference).
 
   
10(iii)(n)*
  Form of Executive Employment Continuity Agreement (filed as Exhibit 10.1 to Commercial Metals’ Form 10-Q for the quarter ended February 28, 2006 and incorporated herein by reference)

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EXHIBIT    
NO.   DESCRIPTION
10(iii)(o)*
  Form of Restricted Stock Unit Award Agreement (filed as Exhibit 10.2 to Commercial Metals’ Form 8-K filed May 26, 2009 and incorporated herein by reference)
 
   
10(iii)(p)*
  Retirement and Consulting Agreement, between Commercial Metals Company and David M. Sudbury, dated as of May 28, 2009 (filed as Exhibit 10.1 to Commercial Metals’ Form 8-K filed May 29, 2009 and incorporated herein by reference)
 
   
10(iii)(q)*
  Form of Non-Employee Director Stock Appreciation Rights Agreement (filed herewith)
 
   
12
  Statement re computation of earnings to fixed charges (filed herewith).
 
   
21
  Subsidiaries of Registrant (filed herewith).
 
   
23
  Consent of Independent Registered Public Accounting Firm to incorporation by reference of report dated October 30, 2009, accompanying the consolidated financial statements and financial statement schedule of Commercial Metals Company and subsidiaries for the year ended August 31, 2009, into previously filed Registration Statements No. 333-141663, No. 333-141662, No. 333-90726, No. 333-90724, No. 033-61073, No. 033-61075, No. 333-27967 and No. 333-42648 on Form S-8 and Registration Statements No.  333-144500 on Form S-3 (filed herewith).
 
   
31(a)
  Certification of Murray R. McClean, President and Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
   
31(b)
  Certification of William B. Larson, Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
   
32(a)
  Certification of Murray R. McClean, President and Chief Executive Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
   
32(b)
  Certification of William B. Larson, Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
*   Denotes management contract or compensatory plan.
 
**   Does not contain Schedules or exhibits. A copy of any such Schedules or exhibits will be furnished to the Securities and Exchange Commission upon request.

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SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
                                                 
            Additions   Deductions    
    Balance at   Charged to   Charged   Charged to   Charged to   Balance at
    Beginning   Costs and   to Other   Costs and   Other   End of
Description   of Period   Expenses   Accounts   Expenses   Accounts   Period
Year ended August 31, 2009
                                               
Allowance for doubtful accounts
  $ 17,652       33,733       3,448 (1)           (12,699 )(2)   $ 42,134  
 
                                               
Year ended August 31, 2008
                                               
Allowance for doubtful accounts
  $ 16,495       4,478       7,048 (1)           (10,369 )(2)   $ 17,652  
 
                                               
Year ended August 31, 2007
                                               
Allowance for doubtful accounts
  $ 16,075             4,020 (1)     (370 )     (3,230 )(2)   $ 16,495  
 
(1)   Acquisitions and recoveries.
 
(2)   Uncollectable accounts charged to the allowance and translation adjustments.

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SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
   
COMMERCIAL METALS COMPANY
 
   
 
  /s/ Murray R. McClean
 
By: Murray R. McClean
   
 
  President, Chief Executive Officer,
and Chairman of the Board of Directors
   
 
  Date: October 30, 2009    
     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
     
/s/ Murray R. McClean
  /s/ Robert D. Neary
 
   
Murray R. McClean, October 30, 2009
  Robert D. Neary, October 30, 2009
President, Chief Executive Officer,
and Chairman of the Board of Directors
  Director
 
   
/s/ Harold L. Adams
  /s/ Dorothy G. Owen
 
   
Harold L. Adams, October 30, 2009
  Dorothy G. Owen, October 30, 2009
Director
  Director
 
   
/s/ Moses Feldman
  /s/ J. David Smith
 
   
Moses Feldman, October 30, 2009
  J. David Smith, October 30, 2009
Director
  Director
 
   
/s/ Robert L. Guido
  /s/ Robert R. Womack
 
   
Robert L. Guido, October 30, 2009
  Robert R. Womack, October 30, 2009
Director
  Director
 
   
/s/ Ralph E. Loewenberg
  /s/ William B. Larson
 
   
Ralph E. Loewenberg, October 30, 2009
  William B. Larson, October 30, 2009
Director
  Senior Vice President and Chief Financial Officer
 
   
/s/ Anthony A. Massaro
  /s/ Leon K. Rusch
 
   
Anthony A. Massaro, October 30, 2009
  Leon K. Rusch, October 30, 2009
Director
  Controller

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EXHIBIT 3(i)

RESTATED

CERTIFICATE OF INCORPORATION

OF

COMMERCIAL METALS COMPANY

COMMERCIAL METALS COMPANY, a corporation duly organized and existing

under the laws of the State of Delaware, DOES HEREBY CERTIFY:

THAT the original Certificate of Incorporation of Commercial Metals Company was filed with the Secretary of State of the State of Delaware on the twenty-ninth day of August, 1946, at 10:00 A.M.;

THAT this Restated Certificate of Incorporation of Commercial Metals Company was duly adopted by the Board of Directors of Commercial Metals Company in accordance with the provisions of Section 245 of the General Corporation Laws of the State of Delaware;

THAT this Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of Commercial Metals Company as heretofore amended and supplemented; and

THAT there is no discrepancy between the provisions of the Certificate of Incorporation of Commercial Metals Company as heretofore amended and supplemented and the provisions of this Restated Certificate of Incorporation.

* * * * * * *

FIRST. The name of the corporation is COMMERCIAL METALS COMPANY.

SECOND. Its principal office in the State of Delaware is located at 1209 Orange Street, Corporation Trust Center, Wilmington, Delaware 19801. The name and address of its resident agent is The Corporation Trust Company, 1209 Orange Street, Corporation Trust Center, Wilmington, Delaware 19801.

THIRD. The nature of the business, or objects of purposes to be transacted, promoted or carried on are:

To buy, sell and generally deal in and with ferrous and non-ferrous metals.

To buy and sell goods, wares and merchandise of any description, by wholesale or wholesale and retail.


To manufacture, buy, sell, import, export, construct, erect, fabricate, treat and generally deal and traffic in and with iron and steel, and the products and by-products thereof of every kind and description; and to manufacture, buy, sell, deal in, and traffic in all or any articles, commodities, devices or things consisting or partly consisting of iron, steel, carbon, tungsten, silicon, manganese, copper, zinc, tin, aluminum, lead and other metals and all alloys or any products and by-products thereof.

To buy, lease, construct, own, control, operate, and maintain mills, works, and plants for the crushing, sampling, milling, smelting, reduction, and concentration of minerals and metal-bearing ores, and the extraction therefrom of all kinds of metals and mineral products and by-products, on its own account and as factor and agent for others.

To carry on the business of mining, milling, concentrating, converting, smelting, treating, preparing for market, reducing, buying, selling, and merchandising in iron, steel, and other metals and metallic compounds, coal, coke, charcoal, and other fuels, and all products and by-products of all ores and minerals.

To engage in the business of fabricating, stamping, pressing, drawing and spinning, heating, treating, annealing, hardening and working of metals and metallic compounds.

To receive on consignment or commission, and to sell, rent, lease, license the use of, handle, pledge, mortgage or otherwise utilize, prepare for market and market or in any way dispose of any and all of the above mentioned articles of commerce.

To purchase or otherwise acquire, lease, build, construct, improve, maintain, manage, develop, control, operate, sell or otherwise dispose of, let, license to use, and mortgage, mills, smelters, factories, furnaces, plants, warehouses, shops, buildings, boats, ships, barges and all other works and conveniences necessary or incident to carrying out the objects and purposes of this corporation.

To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation.

To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade-marks and trade names, relating to or useful in connection with any business of this corporation.

To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by any corporation, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof.

2

To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof.

To borrow or raise moneys for any of the purposes of the corporation and, from time to time, without limit as to amount to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the corporation for its corporate purposes.

To buy, sell or otherwise deal in notes, open accounts, and other similar evidences of debt, or to loan money and take notes, open accounts, and other similar evidences of debt as collateral security therefor.

To purchase, hold, sell and transfer the shares of its own capital stock; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital except as otherwise permitted by law, and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly.

To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and personal property of every class and description in any of the States, Districts, Territories or Colonies of the United States, and in any and all foreign countries, subject to the laws of such State, District, Territory, Colony or Country.

In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formed under the General Corporation Law of the State of Delaware, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do.

The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in this certificate of incorporation, but the objects and purposes specified in each of the foregoing clauses of this article shall be regarded as independent objects and purposes.

FOURTH. The aggregate number of shares of capital stock which the corporation shall have authority to issue is Twenty-two Million (22,000,000) of which Twenty Million (20,000,000) shares shall be common stock at the par value of Five Dollars ($5.00) per share and Two Million (2,000,000) shares shall be preferred stock of the par value of the One Dollar ($1.00) per share.

Shares of Preferred Stock may be issued from time to time in one or more series, each such series to have such distinctive designation or title as may be fixed by the Board of Directors

3

prior to the issuance of any shares thereof. Each share of any series of Preferred Stock shall be identical with all other shares of such series, except as to the date from which accumulated preferred dividends, if any, shall be cumulative. Each such series shall have such voting powers, if any, and such preferences and relative, participating, optional or other special rights, with such qualifications, limitations or restrictions of such preferences and/or rights as shall be stated in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series of Preferred Stock, including, but without limiting the generality of the foregoing, the following:

(a) The rate and times at which, and the terms and conditions on which; dividends on Preferred Stock or series thereof shall be paid;

(b) The right, if any, of the holders of Preferred Stock or series thereof to convert the same into or exchange the same for, shares of other classes or series of stock of the corporation and the terms and conditions of such conversion or exchange;

(c) The redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock or series thereof may be redeemed;

(d) The rights of the holders of Preferred Stock or series thereof upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the corporation; and

(e) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock or series thereof.

After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of this Article Fourth) shall have been met and after the corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of this Article Fourth), then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors.

After distribution in full of the preferential amount (fixed in accordance with the provisions of this Article Fourth) to be distributed to the holders of Preferred Stock in the event of the voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the corporation, the holders of the Common Stock shall be entitled to receive ratably all of the remaining assets of the corporation available for distribution to stockholders.

Except as may otherwise be required by law, each holder of Common Stock shall have one vote in respect of each share of stock held by him on all matters voted upon by stockholders.

No holder of stock of any class of the corporation shall be entitled as of right to subscribe for or purchase any shares of stock of any class whether now or hereafter authorized, or any bonds, debentures, or other evidences of indebtedness whether or not convertible into or exchangeable for stock.

FIFTH. The minimum amount of capital with which the corporation will commence business is One Thousand Dollars ($1,000.00).

4

SIXTH. The names and places of residence of the incorporators are as follows:

NAMES                     RESIDENCES
-----                     ----------
Walter Lenz               Wilmington, Delaware
S. M. Brown               Wilmington, Delaware
H. K. Webb                Wilmington, Delaware

SEVENTH. The corporation is to have perpetual existence.

EIGHTH. The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever.

NINTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:

To make, alter or repeal the by-laws of the corporation.

To authorize and cause to be executed mortgages and liens upon the real and personal property of the corporation.

To set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created.

By resolution or resolutions passed by a majority of the whole board, to designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in said resolution or resolutions or in the by-laws of the corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the by-laws of the corporation or as may be determined from time to time by resolution adopted by the Board of Directors.

When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, to sell, lease or exchange all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as its Board of Directors shall deem expedient and for the best interests of the corporation.

TENTH. Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them, and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 3883 of the Revised Code of 1915 of said State, or on the application of trustees in

5

dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 43 of the General Corporation Law of the State of Delaware, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation as the case may be, and also on this corporation.

ELEVENTH. Meetings of stockholders may be held without the State of Delaware, if the by-laws so provide. The books of the corporation may be kept (subject to any provisions contained in the statutes) outside of the State of Delaware at such place or places as may be from time to time designated by the Board of Directors or in the by-laws of the corporation.

TWELFTH. Notwithstanding any other provisions of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of capital stock of the corporation entitled to vote generally in the election of directors (hereinafter referred to as the "Voting Stock") required by law or this Restated Certificate of Incorporation, the affirmative vote of the holders of at least 70% of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend, repeal, or adopt any provision inconsistent with Article Fifteenth, Article Sixteenth, Article Seventeenth, or this Article Twelfth; except that an amendment to extend the duration of Article Seventeenth may be adopted by the affirmative vote of the holders of at least a majority of such voting power.

THIRTEENTH. (a) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; provided, however, that in any action brought by or in the right of the corporation, there shall be no indemnification in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or is equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he

6

reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) Any indemnification under subarticle (a) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subarticle (a). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders.

(c) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Article.

(d) The indemnification provided for in this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled, under any by-law, agreement, vote of stockholders, or otherwise.

FOURTEENTH. To the fullest extent permitted by the Delaware General Corporation Law, as it now exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.

FIFTEENTH. Except as otherwise fixed by or pursuant to the provisions of Article Fourth of the Restated Certificate of Incorporation relating to the rights of the holders of the Preferred Stock to elect additional directors under specified circumstances, the number of directors which shall constitute the whole Board of Directors shall be not less than three and shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in the previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption). At the Annual Meeting of Stockholders at which this Article is adopted, the directors shall be divided into three classes, designated Class I, Class II and Class III (which at all times shall be as nearly equal in number as possible), with the term of office of Class I directors to expire at the 1990 Annual Meeting of Stockholders, the term of office of Class II directors to expire at the 1991 Annual Meeting of Stockholders, and the term of office of Class III directors to expire at the 1992 Annual Meeting of Stockholders. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.

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Subject to the right of the holders of any class or series of Voting Stock then outstanding, any director, or the entire board of directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal, has failed to attend twelve consecutive meetings of the Board of Directors, or has been adjudged by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his duty to the corporation in a matter of substantial importance to the corporation, and such adjudication is no longer subject to direct appeal.

Subject to the rights of the holders of any class or series of the Voting Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires. No decrease in the number of authorized directors constituting the entire Board of Directors shall shorten the term of any incumbent director.

Notwithstanding the foregoing, whenever the holders of the Preferred Stock shall have the right to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies, and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article unless expressly provided by such terms.

SIXTEENTH. Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of stockholders of the corporation and may not be effected by any consent in writing by such stockholders. Special meetings of stockholders of the corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time such resolution is presented to the Board for adoption), by holders of not less than a majority of the voting power of all of the then-outstanding shares of Voting Stock or by The Jacob Feldman and Sara B. Feldman Grantor Trust Dated September 24, 1985 and the trustees of that trust acting solely in their capacities as trustees of that trust (collectively, the "Trust") as long as the Trust is the beneficial owner of ten percent or more of the corporation's Voting Stock.

SEVENTEENTH. The stockholder vote required to approve any Business Combination (as hereinafter defined) shall be as set forth in this Article Seventeenth.

(a) (1) Except as otherwise expressly provided in paragraph (b) of this Article Seventeenth:

(A) Any merger or consolidation of the corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder (as hereinafter defined) or (ii) any

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other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or

(B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $25,000,000 or more; or

(C) the issuance or transfer by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any Subsidiary to any Interested Stockholder or any affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $25,000,000 or more; or

(D) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Stockholder or any Affiliate of any Interested Stockholder; or

(E) any reclassification of securities (including any reverse stock split) or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder;

shall require the affirmative vote of the holders of at least 70% of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class (it being understood that for purposes of this Article Seventeenth, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth of this Restated Certificate of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise, and shall be required in addition to any affirmative vote of the holders of any particular class or series of Voting Stock required by law or this Restated Certificate of Incorporation.

(2) The term "Business Combination" as used in this Article Seventeenth shall mean any transaction which is referred to in any one or more of subsections (A) through (E) of subparagraph (1) of this section (a).

(b) The provisions of section (a) of this Article Seventeenth shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law, by any other provision of this Restated Certificate of Incorporation or by any agreement with any national securities exchange, if, in the case of a Business Combination that does not involve any cash or other consideration being received by the stockholders of the corporation, solely in their respective capacities as stockholders of the corporation, the condition specified in the following subparagraph (1) is met, or in the case of any other Business Combination, the conditions specified in either of the following subparagraphs (1) or (2) are met:

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(1) The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined), it being understood that this condition shall not be capable of satisfaction unless there is at least one Disinterested Director.

(2) All of the following conditions shall have been met:

(A) The consideration to be received by holders of shares of a particular class of outstanding Voting Stock shall be in cash or in the same form as the Interested Stockholder has paid for shares of such class of Voting Stock within the two-year period ending on and including the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"). If, within such two-year period, the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class of Voting Stock shall be either cash or the form used to acquire the larger number of shares of such class of Voting Stock acquired by the Interested Stockholder within such two-year period.

(B) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the date (the "Consummation Date") of the consummation of the Business Combination, of the consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following (it being intended that the requirements of this subparagraph (2)(B) shall be required to be met with respect to all shares of Common Stock outstanding whether or not the Interested Stockholder has previously acquired any shares of Common Stock):

(i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the date of the first public announcement of the proposal of the Business Combination (the "Announcement Date") or in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or such other bank as may be selected by the Disinterested Directors), in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, on each share of Common Stock from the Determination Date through the Consummation Date, in an amount up to but not exceeding the amount of interest so payable per share of Common Stock; or

(ii) The Fair Market Value per share of Common Stock on the Announcement Date.

(C) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the Consummation Date, of the consideration other than cash to be received per share by holders of shares of any class, other than Common Stock, of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this subparagraph (2)(C) shall be required to be met with respect to every such class of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock):

(i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested

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Stockholder for any shares of such class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or such other bank as may be selected by the Disinterested Directors), in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, on each share of such class of Voting Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of interest so payable per share of such class of Voting Stock; or

(ii) the Fair Market Value per share of such class of Voting Stock on the Announcement Date; or

(iii) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation.

(D) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (x) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock; (y) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (ii) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (z) such Interested Stockholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder's becoming an Interested Stockholder.

(E) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder of the corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages, provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

(F) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).

(c) For the purposes of this Article Seventeenth:

(1) A "person" shall mean any individual, firm, corporation or other entity.

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(2) "Interested Stockholder" shall mean any person (other than the corporation or any Subsidiary) who or which:

(A) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock; or

(B) is an Affiliate of the corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding Voting Stock; or

(C) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.;

provided that the Trust shall not be an Interested Stockholder until such time as the Trust shall become the beneficial owner of any shares of Voting Stock in addition to the shares of Voting Stock of which it was the beneficial owner on January 26, 1989; provided further that the Trust shall not become an Interested Stockholder solely as a result of action taken solely by the corporation that benefits all holders of Voting Stock pro rata based on their ownership of Voting Stock.

(3) A person shall be a "beneficial owner" of any Voting Stock:

(A) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or

(B) which such person or any of its Affiliates or Associates has (x) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (y) the right to vote pursuant to any agreement, arrangement or understanding; or

(C) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

(4) For the purposes of determining whether a person is an Interested Stockholder pursuant to subparagraph (2) of this paragraph (c), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph (3) of this paragraph (c), but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(5) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1989.

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(6) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in subparagraph (2) of this paragraph (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the corporation.

(7) "Disinterested Director" means any member of the Board of Directors of the corporation (the "Board") who is unaffiliated with the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board.

(8) "Fair Market Value" means: (x) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange - Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System, or if such stock is not quoted on the National Market System, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in good faith; and (y) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith.

(9) In the event of any Business Combination in which the corporation survives, the phrase "consideration other than cash to be received" as used in subparagraphs (2)(A) and (2)(C) of paragraph (b) of this Article Seventeenth shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares.

(d) A majority of the total number of Disinterested Directors (whether or not there exist any vacancies in previously authorized directorships at the time any such determination as is hereinafter in this paragraph (d) specified is to be made by the Board) shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Seventeenth, including, without limitation, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether the applicable conditions set forth in subparagraph (2) of paragraph (b) have been met with respect to any Business Combination, and (5) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $25,000,000 or more.

(e) Nothing contained in this Article Seventeenth shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law.

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(f) Unless extended pursuant to Article Twelfth of this Restated Certificate of Incorporation, the provisions of this Article Seventeenth shall expire and no longer be of any effect after 12 noon Central time on January 27, 1994.

IN WITNESS WHEREOF, the said Commercial Metals Company has caused this Restated Certificate of Incorporation of Commercial Metals Company to be signed by Stanley A. Rabin, its President, and attested by David M. Sudbury, its Secretary, on this 2nd day of March, 1989.

COMMERCIAL METALS COMPANY

                                             /s/ Stanley A. Rabin
                                             ---------------------------------
                                             Stanley A. Rabin
                                             President

ATTEST:


/s/ David M. Sudbury
--------------------------------------
David M. Sudbury
Secretary

STATE OF TEXAS

COUNTY OF DALLAS

BE IT REMEMBERED that on this 2nd day of March, 1989, personally came before me, a Notary Public in and for the State of Texas and County of Dallas, Stanley A. Rabin, President of Commercial Metals Company, a corporation duly organized and existing under the laws of the State of Delaware, and he duly executed the Restated Certificate of Incorporation of Commercial Metals Company before me and acknowledged that the said certificate be his act and deed of the said corporation and the facts stated therein are true, that the seal affixed to the said certificate and attested by the Secretary of the said corporation is the common or corporate seal of the said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid.

[illegible]
NOTARY PUBLIC in and for Dallas County, Texas

My Commission Expires: December 5, 1990

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EXHIBIT 3(i)a

CERTIFICATE OF AMENDMENT

OF

RESTATED CERTIFICATE OF INCORPORATION

OF

COMMERCIAL METALS COMPANY

COMMERCIAL METALS COMPANY, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation", DOES
HEREBY CERTIFY:

FIRST: That the Board of Directors of the Corporation, at a meeting duly held, adopted resolutions setting forth the following amendment to the Corporation's Restated Certificate of Incorporation, declaring this amendment to be advisable and designating the next annual meeting of the stockholders of the Corporation for consideration thereof:

The present Article Seventeenth of the Corporation's Restated Certificate of Incorporation shall be replaced in its entirety by the following:

SEVENTEENTH: The stockholder vote required to approve any Business Combination (as hereinafter defined) shall be as set forth in this Article Seventeenth:

(a)(1) Except as otherwise expressly provided in paragraph (b) of this Article Seventeenth:

(A) Any merger or consolidation of the corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or

(B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the corporation or any


Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $25,000,000 or more; or

(C) the issuance or transfer by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $25,000,000 or more; or

(D) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Stockholder or any Affiliate of any Interested Stockholder; or

(E) any reclassification of securities (including any reverse stock split) or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder;

shall require the affirmative vote of the holders of at least 70% of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class (it being understood that for purposes of this Article Seventeenth, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth of this Restated Certificate of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise, and shall be required in addition to any affirmative vote of the holders of any particular class or series of Voting Stock required by law or this Restated Certificate of Incorporation.

(2) The term "Business Combination" as used in this Article Seventeenth shall mean any transaction which is referred to in any one or more of subsections (A) through (E) of subparagraph (1) of this section (a).

(b) The provisions of section (a) of this Article Seventeenth shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law, by any other provision of this Restated Certificate of Incorporation or by any agreement with any national securities exchange, if, in the case of a Business Combination that does not involve any cash or other consideration being received by the stockholders of the corporation, solely in their respective capacities as stockholders of the corporation, the condition specified in the following subparagraph (1) is met, or, in the case of any other Business Combination, the conditions specified in either of the following subparagraphs (1) or (2) are met:

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(1) The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined), it being understood that this condition shall not be capable of satisfaction unless there is at least one Disinterested Director.

(2) All of the following conditions shall have been met:

(A) The consideration to be received by holders of shares of a particular class of outstanding Voting Stock shall be in cash or in the same form as the Interested Stockholder has paid for shares of such class of Voting Stock within the two-year period ending on and including the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"). If, within such two-year period, the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting stock acquired by the Interested Stockholder within such two-year period.

(B) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the date (the "Consummation Date") of the consummation of the Business Combination, of the consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following (it being intended that the requirements of this subparagraph (2)(B) shall be required to be met with respect to all shares of Common Stock outstanding whether or not the Interested Stockholder has previously acquired any shares of Common Stock):

(i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the date of the first public announcement of the proposal of the Business Combination (the "Announcement Date") or in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or such other bank as may be selected by the Disinterested Directors), in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, on each share of Common Stock from the Determination Date through the Consummation Date, in an amount up to but not exceeding the amount of interest so payable per share of Common Stock; or

(ii) the Fair Market Value per share of Common Stock on the Announcement Date.

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(C) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the Consummation Date, of the consideration other than cash to be received per share by holders of shares of any class, other than Common Stock, of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this subparagraph (2)(C) shall be required to be met with respect to every such class of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock):

(i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or such other bank as may be selected by the Disinterested Directors), in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, on each share of such class of Voting Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of interest so payable per share of such class of Voting Stock; or

(ii) the Fair Market Value per share of such class of Voting Stock on the Announcement Date; or

(iii) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation.

(D) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (x) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock; (y) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (ii) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (z) such Interested Stockholder shall have not become the beneficial owner of any

4

additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder's becoming an Interested Stockholder.

(E) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder of the corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

(F) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).

(c) For the purposes of this Article Seventeenth:

(1) A "person" shall mean any individual, firm, corporation or other entity.

(2) "Interested Stockholder" shall mean any person (other than the corporation or any Subsidiary) who or which:

(A) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock; or

(B) is an Affiliate of the corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding Voting Stock; or

(C) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933;

provided that the Trust shall not be an Interested Stockholder until such time as the Trust shall become the beneficial owner of any shares of Voting Stock in addition to the shares of Voting Stock of which it was the beneficial owner on January 27, 1994; provided further that the Trust shall not become an Interested Stockholder solely as a result of action taken solely by the corporation that benefits all holders of Voting Stock pro rata based on their ownership of Voting Stock.

5

(3) A person shall be a "beneficial owner" of any Voting Stock:

(A) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or

(B) which such person or any of its Affiliates or Associates has (x) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (y) the right to vote pursuant to any agreement, arrangement or understanding; or

(C) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

(4) For the purposes of determining whether a person is an Interested Stockholder pursuant to subparagraph (2) of this paragraph
(c), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph
(3) of this paragraph (c), but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(5) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1994.

(6) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in subparagraph (2) of this paragraph (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the corporation.

(7) "Disinterested Director" means any member of the board of directors of the corporation (the "Board") who is unaffiliated with the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board.

(8) "Fair Market Value" means: (x) in the case of stock, the highest closing sales price during the 30-day period immediately preceding the date in question of a share

6

of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System, or if such stock is not quoted on the National Market System, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in good faith; and (y) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith.

(9) In the event of any Business Combination in which the corporation survives, the phrase "consideration other than cash to be received" as used in subparagraphs (2) (A) and (2) (C) of paragraph (b) of this Article Seventeenth shall include the shares of Common Stock and/or shares of any other class of outstanding Voting Stock retained by the holders of such shares.

(d) A majority of the total number of Disinterested Directors (whether or not there exist any vacancies in previously authorized directorships at the time any such determination as is hereinafter in this paragraph (d) specified is to be made by the Board) shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Seventeenth, including, without limitation, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether the applicable conditions set forth in subparagraph (2) of paragraph (b) have been met with respect to any Business Combination, and (5) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $25,000,000 or more.

(e) Nothing contained in this Article Seventeenth shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law.

(f) Unless extended pursuant to Article Twelfth of this Restated Certificate of Incorporation, the provisions of this Article Seventeenth shall expire and no longer be of any effect after 12 noon, Central time, on January 28, 1999.

SECOND: That thereafter, pursuant to a resolution of the Board of Directors of the Corporation, an annual meeting of stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of

7

Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Stanley A. Rabin, its President, and attested by David M. Sudbury, its Secretary this 1st day of February, 1994.

COMMERCIAL METALS COMPANY

                                             By: /s/ Stanley A. Rabin
                                                 -------------------------------
                                                 Stanley A. Rabin
                                                 President



ATTEST:

By:      /s/ David M. Sudbury
   -----------------------------------
         David M. Sudbury
         Secretary

8

EXHIBIT (3)(i)(b)

CERTIFICATE OF AMENDMENT

OF

RESTATED CERTIFICATE OF INCORPORATION

OF

COMMERCIAL METALS COMPANY

COMMERCIAL METALS COMPANY, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:

FIRST: That the Board of Directors of the Corporation, at a meeting duly held, adopted resolutions setting forth the following amendment to the Corporation's Restated Certificate of Incorporation, declaring this amendment to be advisable and designating the next annual meeting of the stockholders of the Corporation for consideration thereof:

The first paragraph of the present Article Fourth of the Corporation's Restated Certificate of Incorporation shall be replaced in its entirety by the following paragraph with the remainder of the present Article Fourth remaining unchanged:

FOURTH: The aggregate number of shares of capital stock which the corporation shall have authority to issue is Forty Two Million (42,000,000) of which Forty Million (40,000,000) shares shall be Common Stock at the Par Value of Five Dollars ($5.00) per share and Two Million (2,000,000) shares shall be Preferred Stock of the Par Value of One Dollar ($1.00).

SECOND: That thereafter, pursuant to a resolution of the Board of Directors of the Corporation, an annual meeting of stockholders of the Corporation was duly called and held,


upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting necessary number of shares as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Stanley A. Rabin, its President, and attested by David M. Sudbury, its Secretary this 17th day of February, 1995.

COMMERCIAL METALS COMPANY

                                       By:  /s/ Stanley A. Rabin
                                          -------------------------------
                                            Stanley A. Rabin
                                            President


ATTEST:


By:  /s/ David M. Sudbury
   ------------------------------------
     David M. Sudbury
     Secretary


EXHIBIT 3(ii)

AMENDED AND RESTATED BYLAWS

OF

COMMERCIAL METALS COMPANY

ARTICLE I

OFFICES

      Section 1. Principal Office.

     The principal and registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.

      Section 2. Other Offices.

     The corporation may also have offices in the City of Dallas, State of Texas, and also offices at such other places as the board of directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

      Section 1. Place of Meetings.

     All meetings of the shareholders shall be held at the office of the corporation in Dallas, Texas, or at such other place as shall be determined by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. The board of directors may, in its sole discretion, determine that the meeting shall not be held at any place but may instead be held solely by means of remote communication. Shareholders and proxyholders not physically present at a meeting of shareholders may, by means of remote communication, participate in a meeting of shareholders and be deemed present in person and vote at a meeting of shareholders whether such meeting is to be held at a designated place or solely by means of remote communication provided (a) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote by remote communication is a shareholder or proxyholder, (b) the corporation shall implement reasonable measures to provide such shareholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings, and (c) if any shareholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.

      Section 2. Annual Meeting.

     An annual meeting of shareholders, commencing with the year 1947, shall be held on the fourth Thursday of January in each year if not a legal holiday, and if a legal holiday, then on the next full

 


 

business day following, at 10:00 A.M., at which the shareholders shall elect a board of directors and transact such other business as may properly be brought before the meeting. All election of directors shall be by written ballot. The board of directors may authorize that the requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the shareholder or proxyholder.

      Section 3. Notice of Annual Meeting.

     Written or printed notice of the annual meeting, stating the place, if any, date and hour thereof, and means of remote communication, if any, by which shareholders and proxyholders may be deemed to be present in person and vote at such meeting shall be given to each shareholder entitled to vote at such meeting not less than ten days nor more than sixty days before the date of the meeting. Any notice given to the shareholders by the corporation under the restated certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the shareholder to whom notice is given. The consent shall be revocable by the shareholder by written notice to the corporation. Any such consent shall be deemed revoked if (a) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (b) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent or other person responsible for the giving of notice. Inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice by electronic transmission shall be deemed given (a) if by facsimile telecommunication, when directed to a number at which the shareholder has consented to receive notice; (b) if by electronic mail, when directed to an electronic mail address at which the shareholder has consented to receive notice; (c) if by posting on an electronic network together with separate notice to the shareholder of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and (d) if by any other form of electronic transmission, when directed to the shareholder.

      Section 4. Special Meetings.

     Special meetings of shareholders of the corporation, for any purpose or purposes, unless otherwise prescribed by statute or the restated certificate of incorporation, may be called only by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time such resolution’s presented to the board for adoption), by the holders of no less than a majority of the voting power of all of the then-outstanding shares of any class or series of capital stock of the corporation entitled to vote generally in the election of directors (“ Voting Stock ”), or by The Jacob Feldman and Sara B. Feldman Grantor Trust dated September 24, 1985 and the trustees of that trust acting solely in their capacities as trustees of that trust (collectively, the “ Trust ”), as long as the Trust is the beneficial owner of ten percent or more of the Voting Stock. As a prerequisite to calling a special meeting, the holders of a majority of the voting power of the Voting Stock or the Trust must submit a request in writing to the president or secretary of the corporation stating the purpose or purposes of the proposed meeting.

      Section 5. Notice of Special Meeting.

     Written or printed notice of a special meeting of shareholders, stating the place, day and hour, and purpose or purposes thereof, shall be served upon or mailed to each shareholder entitled to vote thereat at such address as appears on the books of the corporation, not less than ten days nor more than fifty days before the date of the meeting.

 


 

      Section 6. Business at Special Meeting.

     Business transacted at all special meetings shall be confined to the purpose or purposes stated in the notice.

      Section 7. Shareholder List.

     The officer of the corporation who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. If the list is made available on an electronic network, the corporation shall take reasonable steps to ensure that the information is available only to shareholders of the corporation. If the meeting is to be held at a place, the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder of the corporation who is present. If the meeting is to be held solely by means of remote communication, then the list shall be open to the examination of any shareholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such a list shall be provided with the notice of the meeting.

      Section 8. Quorum.

     The holders of a majority of the shares of capital stock issued and outstanding and entitled to vote thereat, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute, the restated certificate of incorporation, or these bylaws. The shareholders present may adjourn the meeting despite the absence of a quorum. When a meeting is adjourned for less than thirty days in any one adjournment, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and of the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. When a meeting is adjourned for thirty days or more, notices of the adjourned meeting shall be given as in the case of an original meeting.

      Section 9. Majority Vote.

     When a quorum is present at any meeting, the vote of the holders of a majority of the shares having voting power represented in person or by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of statute, the restated certificate of incorporation, or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question.

      Section 10. Proxies.

     At any meeting of the shareholders every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing subscribed by such shareholder or his duly authorized attorney in fact and bearing a date net more than eleven months prior to said meeting, unless said instrument provides for a longer period.

 


 

      Section 11. Voting.

     Unless otherwise provided by statute, the restated certificate of incorporation, or these bylaws, each shareholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation.

      Section 12. No Action By Written Consent.

     Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of stockholders of the corporation and may not be effected by any consent in writing by such stockholders.

      Section 13. Meeting by Remote Communication.

     Shareholders may participate in and hold a meeting by means of remote communication, including conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, provided that (a) the corporation implements reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a shareholder or proxyholder, (b) the corporation implements reasonable measures to provide such shareholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (c) if any shareholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation. Participation in a meeting by such means shall constitute presence in person at the meeting.

ARTICLE III

BOARD OF DIRECTORS

      Section 1. Powers.

     The business and affairs of the corporation shall be managed by a board of directors. The board may exercise all such power of the corporation and do all such lawful acts and things as are not by statute, by the restated certificate of incorporation, or these bylaws directed to be exercised or done by the shareholders.

      Section 2. Number of Directors.

     Except as otherwise fixed by or pursuant to the provisions of Article Fourth of the restated certificate of incorporation relating to the rights of the holders of the preferred stock to elect additional directors under specified circumstances, the number of directors which shall constitute the whole board of directors shall be not less than three and shall be fixed from time to time exclusively by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the board of directors for adoption).

      Section 3. Election and Term.

     The board of directors shall be divided into three classes serving for those initial terms as provided in Article Fifteenth of the restated certificate of incorporation. Except as provided in Section 4 of this Article III, at each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of

 


 

office to expire at the third succeeding annual meeting of shareholders. Directors need not be shareholders. Notwithstanding any provision of this Section 3 or Section 4 of this Article, holders of the preferred stock shall have the right to elect annual or special meeting of stockholders, the election term of office, filling of vacancies, and other features of such directorships shall be terms of the restated certificate of incorporation applicable and such directors so elected shall not be divided into classes to Article Fifteenth of the restated certificate of incorporation unless expressly provided by the terms of the preferred stock.

      Section 4. Vacancies and Newly Created Directorships.

     Subject to the rights of the holders of any class or series of Voting Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors, or any vacancies on the board of directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of shareholders at which the term of office of the class to which they have been elected expires. No decrease in the number of authorized directors constituting the entire board of directors shall shorten the term of any incumbent director.

      Section 5. Resignation, Removal.

     Any director may resign at any time. Subject to the right of the holders of any class or series of Voting Stock then outstanding, any director, or the entire board of directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class. Except as may otherwise be provided by law, cause for removal shall exist only if the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal, has failed to attend twelve consecutive meetings of the board of directors, or has been adjudged by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his duty to the corporation in a matter of substantial importance to the corporation, and such adjudication is no longer subject to direct appeal.

ARTICLE IV

MEETINGS OF THE BOARD

      Section l. First Meeting.

     The first meeting of each newly elected board shall be held at the location of and immediately following the annual meeting of shareholders, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting provided a quorum shall be present; or the board may meet at such place and time as shall be fixed by the consent in writing of all the directors.

      Section 2. Regular Meeting.

     Regular meetings of the board may be held at such time and place either within or without of the State of Delaware and with such notice as shall be determined from time to time by the board.

      Section 3. Special Meetings.

     Special meetings of the board may be called by the chairman of the board or the president, at any time, if notice to each director is given, either personally, or by mail, by telephone, by facsimile or electronic transmission in accordance with Section 2 of Article VII hereof. Special meetings shall be called

 


 

by the chairman of the board, the president or the secretary in like manner and on like notice on the written request of any two directors.

      Section 4. Quorum and Voting.

     At all meetings of the board a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business; and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the restated certificate of incorporation, or these bylaws. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

      Section 5. Telephone Meetings.

     Members of the board of directors of the corporation, or any committee designated by the board of directors, may participate in a meeting of the board of directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 5 shall constitute presence in person at such meeting.

      Section 6. Action by Written Consent.

     Any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all the members of the board of directors or committee, as the case may be, consent thereto in writing, or by electronic transmission and the writing or writings or electronic transmission or electronic transmissions are filed with the minutes of proceedings of the board of directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

ARTICLE V

COMMITTEES

      Section 1. Standing Committees.

     The board of directors, by resolution adopted by a majority of the whole board, shall designate directors to serve on the audit committee, the compensation committee, and the nominating and corporate governance committee of the board, which committees shall constitute the standing committees of the board.

      Section 2. Other Committees.

     The board of directors may similarly create other committees for such terms and with such powers and duties as the board deems appropriate.

 


 

ARTICLE VI

COMPENSATION OF DIRECTORS

     The board of directors shall have the authority to fix the compensation of the directors and the members of committees of the board of directors. The compensation of the directors need not be uniform as between directors, and the compensation of the members of the committees of the board need not be uniform either as between members of a committee or as between committees. The directors shall be reimbursed for expenses incurred in attending meetings of the board or committees thereof.

ARTICLE VII

NOTICES

      Section 1. Methods of Notice to Shareholders.

     Whenever any notice is required to be given to any shareholder under the provisions of any statute, the restated certificate of incorporation, or these bylaws, it shall not be construed to require personal notice, but such notice may be given in writing by mail addressed to such shareholder at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail with postage thereon prepaid. Without limiting the manner by which notice may otherwise be given effectively to shareholders, any notice to shareholders may be given by electronic transmission in the manner provided in Section 232 of the Delaware General Corporation Law.

      Section 2. Methods of Notice to Directors or Members of a Committee.

     Whenever any notice is required to be given to any director or member of a committee under the provisions of any statute, the restated certificate of incorporation, or these bylaws, it may be given either personally, or by mail, by telephone, by facsimile or electronic transmission directed to each director at the director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the corporation’s records. If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’s principal executive office) nor the purpose of the meeting.

      Section 3. Waiver of Notice.

     Whenever any notice is required to be given to any shareholder, member of a committee, or director under the provisions of any statute, the restated certificate of incorporation, or these bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute a waiver of notice thereof except as provided by statute.

 


 

ARTICLE VIII

OFFICERS

      Section 1. Executive Officers.

     The officers of the corporation shall consist of a president, a vice president, a secretary, and a treasurer, each of whom shall be elected by the board of directors. The board of directors may also elect a chairman of the board, additional vice presidents, and one or more assistant secretaries assistant treasurers.

      Section 2. Election and Qualification.

     The board of directors at its first meeting after each annual meeting of shareholders shall elect the president, one or more vice presidents, a secretary, and a treasurer, none of whom need to be a member of the board.

      Section 3. Other Officers and Agents.

     The board may elect or appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as may be determined from time to time by the board.

      Section 4. Salaries.

     The salaries of all officers of the corporation shall be fixed by the board of directors except as provided by the charter of the compensation committee of the board or as otherwise directed by the board.

      Section 5. Term, Removal, and Vacancies.

     The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer, agent or member of the executive committee elected or appointed by the board of directors may be removed, with or without cause, at any time by the board of directors. If any such office becomes vacant for any reason, the vacancy shall be filled by the board of directors.

      Section 6. President.

     The president shall be the chief executive officer of the corporation. He shall preside at all meetings of the shareholders and the board of directors unless such duties shall have been assigned to a chairman of the board by the board of directors. He shall have general powers of oversight, supervision and management of the business and affairs of the corporation, and shall see that all orders and resolutions of the board of directors are carried into effect.

      Section 7. Vice Presidents.

     The vice presidents in the order determined by the board of directors shall, in the absence or disability of the president, perform the duties and exercise the powers of the president, and shall perform such other duties as the board of directors and president may prescribe.

 


 

      Section 8. Secretary.

     The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors and president. He shall keep in safe custody the seal of the corporation and, when authorized by the board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of the assistant secretary.

      Section 9. Assistant Secretaries.

     The assistant secretaries in the order determined by the board of directors shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties as the board of directors and president may prescribe.

      Section 10. Treasurer.

     The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all monies and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board, taking proper vouchers for such disbursements, and shall render to the board of directors and president, whenever they may require it, an account of all of his transactions as treasurer and of the financial condition of the corporation.

      Section 11. Assistant Treasurers.

     The assistant treasurers in the order determined by the board of directors shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties as the board of directors and president may prescribe.

      Section 12. Officer’s Bond.

     If required by the board of directors, any officer shall give the corporation a bond (which shall be renewed as the board may require) in such sum and with such surety or sureties as shall be satisfactory to the board for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in his possession or under his control belonging to the corporation.

ARTICLE IX

SHARES AND SHAREHOLDERS

      Section 1. Certificates Representing Shares.

     The shares of the corporation shall be evidenced by certificates in such form as the appropriate officers of the corporation may from time to time prescribe; provided that the board of directors may provide by resolution or resolutions that some or all of the shares of classes or series of stock of the corporation may be represented by uncertificated shares. Notwithstanding the foregoing, each holder of uncertificated shares shall be entitled, upon request, to a certificate representing such shares. Shares

 


 

represented by certificates shall be numbered and registered in a share register as they are issued. Share certificates shall exhibit the name of the registered holder and the number and class of shares and the series, if any, represented thereby and the par value of each share or a statement that such shares are without par value as the case may be. Except as otherwise provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificated shares of the same class and series shall be identical.

      Section 2. Transfer of Shares.

     Subject to valid transfer restrictions and to stop-transfer orders directed in good faith by the corporation to any transfer agent to prevent possible violations of federal or state securities laws, rules or regulations, or for any other lawful purpose, upon surrender to the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The board of directors may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of shares of stock of the corporation and concerning the registration of pledges of uncertificated shares.

      Section 3. Fixing Record Date.

     For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date, in any case, to be not more than sixty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the date next preceding the date on which the notice is mailed, and the record date for the determination of shareholders for any other purpose shall be the date on which the board of directors adopts the resolution relating thereto. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as herein provided, such determination may apply to any adjournment thereof except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired.

      Section 4. Registered Shareholders.

     The corporation shall be entitled to recognize the exclusive right of a person (including any shareholder registered in a book-entry or direct registration system maintained by the corporation or by a transfer agent or by a registrar designated by the board of directors) as the owner of the share or shares to receive dividends, and to vote as such owner, and for all other purposes as such owner; and the corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

      Section 5. Lost Certificate.

     The board of directors may direct a new certificate or certificates to be issued or may register uncertificated shares in place of any certificate or certificates theretofore issued by the corporation alleged

 


 

to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or corporation a bond in such sum as it may direct as indemnity that may be made against the corporation with respect to the alleged loss or destruction of any such certificate, the issuance of such new certificate or the registration of such uncertificated shares.

ARTICLE X

GENERAL

      Section 1. Dividends.

     The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares of capital stock in cash, in property, or in its own shares, except when the declaration or payment thereof would be contrary to statute or the restated certificate of incorporation. Such dividends may be declared at any regular or special meeting of the board, and the declaration and payment shall be subject to all applicable provisions of law, the restated certificate of incorporation, and these bylaws.

      Section 2. Reserves.

     Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, deem proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

      Section 3. Annual Statement.

     The chairman of the board, the president or the board of directors shall present at each annual meeting and when called for by vote of the shareholders at any special meeting of the shareholders, a full and clear statement of the business and condition of the corporation.

      Section 4. Checks.

     All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.

      Section 5. Corporate Records.

     The corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders giving the names and addresses of all shareholders and the number and class of shares held by each. All other books and records of the corporation may be kept at such place or places within or without the State of Delaware as the board of directors may from time to time determine.

      Section 6. Seal.

     The corporate seal shall have inscribed thereon the name of the corporation. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced.

 


 

      Section 7. Amendment.

     These bylaws may be altered, amended or repealed, or new bylaws may be adopted at any annual meeting of the shareholders or at any special meeting of the shareholders at which a quorum is present or represented, by the affirmative vote of the holders of a majority of the shares entitled to vote at such meeting and present or represented thereat, or by the affirmative vote of a majority of the board of directors at any regular meeting of the board or at any special meeting of the board. Notwithstanding the foregoing, the affirmative vote of the holders of at least seventy percent (70%) of the voting power of all of the Voting Stock then outstanding, voting together as a single class, shall be required to alter, amend, repeal, or adopt any provision inconsistent with Section 4 of Article II , Section 12 of Article II , Section 2 of Article III , Section 3 of Article III , Section 4 of Article III , Section 5 of Article III , this Section 7 of Article X , or Article Twelfth, Article Fifteenth, Article Sixteenth, or Article Seventeenth of the restated certificate of incorporation; except that an amendment to extend the duration of Article Seventeenth may be adopted by the affirmative vote of the holders of at least a majority of such voting power.

 

EXHIBIT 4(i)(e)


COMMERCIAL METALS COMPANY

AND

JPMORGAN CHASE BANK

TRUSTEE


SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 12, 2003

TO

INDENTURE

DATED AS OF JULY 31, 1995


5.625% SENIOR NOTES DUE 2013



TABLE OF CONTENTS

                                                                                           PAGE
                                                                                           ----
ARTICLE ONE
         DEFINITION OF TERMS..........................................................      1
         Section 101.      Definitions................................................      1

ARTICLE TWO
         GENERAL TERMS AND CONDITIONS OF THE NOTES....................................      3
         Section 201.      Designation................................................      3
         Section 203.      Denomination...............................................      3
         Section 204.      Redemption.................................................      3
         Section 205.      Additional Notes...........................................      3
         Section 206.      Appointment of Agents......................................      4

ARTICLE THREE
         REDEMPTION OF THE NOTES......................................................      4
         Section 301.      Optional Redemption by Company.............................      4
         Section 302.      No Sinking Fund............................................      5

ARTICLE FOUR
         SUPPLEMENTAL INDENTURES......................................................      5
         Section 401.      Supplemental Indentures with Consent of Securityholders....      5

ARTICLE FIVE
         REMEDIES          ...........................................................      6
         Section 501.      Events of Default..........................................      6

ARTICLE SIX
         COVENANTS         ...........................................................      6
         Section 601.      Available Information......................................      6

ARTICLE SEVEN
         MISCELLANEOUS     ...........................................................      6
         Section 701.      Ratification of Indenture..................................      6
         Section 702.      Trustee Makes No Representations...........................      6
         Section 703.      Governing Law..............................................      6
         Section 704.      Severability...............................................      7
         Section 705.      Counterparts...............................................      7


SUPPLEMENTAL INDENTURE, dated as of November 12, 2003 (the "SUPPLEMENTAL INDENTURE"), between Commercial Metals Company, a corporation duly organized and existing under the laws of the State of Delaware, having its principal office at 6565 N. MacArthur, Irving, Texas (the "COMPANY"), and JPMorgan Chase Bank, a New York banking corporation, as trustee (the "TRUSTEE") under the Indenture (as hereinafter defined).

RECITALS

WHEREAS, the Company executed and delivered the Indenture, dated as of July 31, 1995, to JPMorgan Chase Bank (formerly The Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.)), as trustee (the "EXISTING INDENTURE," and as heretofore supplemented, the "INDENTURE"), to provide for the issuance of the Company's unsecured debentures, notes or other evidences of indebtedness (the "SECURITIES"), in one or more series;

WHEREAS, pursuant to Section 901 of the Existing Indenture, the Company desires to provide for the issuance of a new series of its Securities to be known as its 5.625% Senior Notes due 2013 (the "NOTES"), and to establish the forms thereof, as in Section 201 of the Existing Indenture provided, and to set forth the terms thereof, as in Section 301 of the Existing Indenture provided;

WHEREAS, the Board of Directors of the Company, pursuant to resolutions duly adopted by the Board of Directors on October 31, 2003 and resolutions duly adopted by the Pricing Committee on November 6, 2003, has duly authorized the issuance of up to $200,000,000 aggregate principal amount of Securities, and has authorized the appropriate officers of the Company to execute any and all appropriate documents necessary or appropriate to effect such issuance;

WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture; and

WHEREAS, all things necessary to make this Supplemental Indenture a valid agreement of the Company, in accordance with its terms, and to make the Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been done;

NOW THEREFORE, in consideration of the premises and the purchase and acceptance of the Notes by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the forms and terms of the Notes, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes as follows:

ARTICLE ONE
DEFINITION OF TERMS

Section 101. Definitions.

Unless the context otherwise requires:


(a) each term defined in the Indenture has the same meaning when used in this Supplemental Indenture;

(b) each term defined anywhere in this Supplemental Indenture has the same meaning throughout;

(c) the singular includes the plural and vice versa;

(d) headings are for convenience of reference only and do not affect interpretation; and

(e) the following terms, as used herein, have the following meanings:

"Additional Notes" means, subject to Section 205 of this Supplemental Indenture, 5.625% Senior Notes due 2013 issued from time to time after the date of this Supplemental Indenture under the terms of the Existing Indenture and this Supplemental Indenture (other than pursuant to Section 304, 305, 306, 906 or 1107 of the Existing Indenture and other than Exchange Notes issued pursuant to an exchange offer for other Notes outstanding under the Indenture).

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchange Notes" means the Notes issued pursuant to the Indenture and this Supplemental Indenture in connection with an Exchange Offer pursuant to the Registration Rights Agreement.

"Exchange Offer" has the meaning specified in the Registration Rights Agreement.

"Existing Indenture" has the meaning specified in the first recital of this Supplemental Indenture.

"Initial Notes" means all Notes other than Exchange Notes.

"Initial Purchasers" means Goldman, Sachs & Co., Banc of America Securities LLC, ABN AMRO Incorporated and Tokyo-Mitsubishi International plc.

"Notes" has the meaning stated in the second recital of this Supplemental Indenture.

"Registration Rights Agreement" means that certain Exchange and Registration Rights Agreement, dated as of November 12, 2003, among the Company and the Initial Purchasers.

"Rule 144A" means Rule 144A under the Securities Act, as the same may be amended from time to time.

"Securities" has the meaning specified in the first recital of this Supplemental Indenture.

"Securities Act" means the Securities Act of 1933, as amended.

"Special Interest" has the meaning specified in the Registration Rights Agreement.

2

ARTICLE TWO
GENERAL TERMS AND CONDITIONS OF THE NOTES

Section 201. Designation.

There is hereby authorized and established a series of Securities under the Indenture. Such series of Securities is hereby designated as the "5.625% Senior Notes due 2013." The aggregate principal amount of the Notes to be issued on the date hereof shall be $200,000,000.

Section 202. Form.

Provisions relating to the Initial Notes and the Exchange Notes are set forth in Appendix A hereto. The Initial Notes and the Trustee's certificate of authentication thereon shall be substantially in the form of Exhibit 1 to Appendix A. The Exchange Notes and the Trustee's certificate of authentication thereon shall be substantially in the form of Exhibit 2 to Appendix A. The Notes may have notations, legends or endorsements required by law, stock exchange rule and agreements to which the Company is subject, if any, or usage. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Appendix A are hereby incorporated in and expressly made part of this Supplemental Indenture.

Section 203. Denomination.

The Company will issue the Notes in denominations of $1,000 and integral multiples of $1,000 in excess thereof; provided, however, that any Notes issued in certificated form to IAIs (as defined in Appendix hereto) shall be in denominations of $100,000 and integral multiples of $1,000 in excess thereof.

Section 204. Redemption.

The Notes are subject to redemption at the option of the Company as described in Article Three hereof.

Section 205. Additional Notes.

(a) The Company shall be entitled, subject to its compliance with this
Section 205, to issue Additional Notes under the Indenture. Additional Notes shall have the same terms and conditions as the Initial Notes issued on the date of this Supplemental Indenture or Exchange Notes, except for issue date, issue price, pre-issuance accrued interest and first interest payment date. The Initial Notes, any Additional Notes and all Exchange Notes shall be treated as a single class for all purposes under the Indenture, including waivers, amendments, redemptions and offers to purchase, but may be treated as separate classes, with, among other things, separate issue prices, for United States federal tax purposes.

(b) With respect to any issuance of Additional Notes, the Company shall deliver to the Trustee a Board Resolution or an Officers' Certificate, and, if the Company elects, a supplemental indenture, which shall together provide the following information:

3

(1) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to the Indenture;

(2) the issue date, issue price, pre-issuance accrued interest and first interest payment date, and the CUSIP number of such Additional Notes; and

(3) whether such Additional Notes shall be Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit 1 to Appendix A or shall be issued in the form of Exchange Notes as set forth in Exhibit 2 to Appendix A.

Section 206. Appointment of Agents.

The Trustee will initially be the Security Registrar and Paying Agent for the Notes and will act as such only at its offices in New York, New York.

ARTICLE THREE
REDEMPTION OF THE NOTES

Section 301. Optional Redemption by Company.

(a) The Notes may be redeemed, as a whole or in part, at any time and from time to time, at the sole election of the Company, upon notice as provided in the Indenture (except that, notwithstanding the provisions of Section 1104 of the Indenture, any notice of redemption for the Notes given pursuant to said
Section need not set forth the Redemption Price but only the manner of calculation thereof), at a Redemption Price equal to the greater of (1) 100% of the principal amount of the Notes being redeemed and (2) the sum of the present values, calculated as of the Redemption Date, of the remaining scheduled payments of principal and interest on the Notes to be redeemed (exclusive of interest accruing on the Redemption Date) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the then current Treasury Rate plus 20 basis points, plus, in each case, accrued and unpaid interest on the principal amount being redeemed to the Redemption Date.

"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term ("Remaining Life") of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes.

"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

"Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Company to act as the Independent Investment Banker from time to time.

"Reference Treasury Dealer" means each of Goldman, Sachs & Co. and Banc of America Securities LLC and their respective successors, and two other firms that are primary U.S.

4

Government securities dealers (each a "Primary Treasury Dealer") which the Company shall specify from time to time; provided, however, that if any of them ceases to be a Primary Treasury Dealer, then the Company shall substitute another Primary Treasury Dealer.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.

"Treasury Rate" means, with respect to any Redemption Date, the rate per annum equal to: (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue; provided that, if no maturity is within three months before or after the Remaining Life of the Notes to be redeemed, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Treasury Rate shall be interpolated or extrapolated from those yields on a straight line basis, rounding to the nearest month, or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. The Treasury Rate shall be calculated on the third Business Day preceding the Redemption Date.

(b) At or prior to the time of giving of any notice of redemption to the Holders of any Notes to be redeemed, the Company shall deliver an Officers' Certificate to the Trustee setting forth the calculation of the Redemption Price applicable to such redemption. The Trustee shall be under no duty to inquire into, may conclusively presume the correctness of, and shall be fully protected in relying upon, the Redemption Price as so calculated and set forth in such Officers' Certificate.

Section 302. No Sinking Fund.

The Notes are not entitled to the benefit of any sinking fund.

ARTICLE FOUR
SUPPLEMENTAL INDENTURES

Section 401. Supplemental Indentures with Consent of Securityholders.

No indenture supplemental to this Supplemental Indenture shall, without the consent of the Holder of each Outstanding Note, modify the obligation of the Company to deliver information as set forth in Section 601 of this Supplemental Indenture.

5

ARTICLE FIVE
REMEDIES

Section 501. Events of Default.

Pursuant to Section 501 of the Existing Indenture, an "Event of Default" with respect to the Notes shall also mean a default in the payment of Special Interest when it becomes due and payable, and continuance of such default for a period of 30 days.

ARTICLE SIX
COVENANTS

Section 601. Available Information.

Until such time as all Outstanding Notes are freely transferable without restriction under the Securities Act, the Company (i) will use its reasonable best efforts to be subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act and to file in a timely manner all reports and other documents required to be filed pursuant thereto or in connection therewith and (ii) will take all actions necessary to permit resales of the Notes pursuant to Rule 144A, including furnishing to any Holder (or owner of a beneficial interest in a Note), or to any prospective purchaser designated by such Holder or beneficial owner, upon request of such Holder or beneficial owner, financial and other information required to be delivered under paragraph
(d)(4) of Rule 144A.

ARTICLE SEVEN
MISCELLANEOUS

Section 701. Ratification of Indenture.

The Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided.

Section 702. Trustee Makes No Representations.

The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely.

Section 703. Governing Law.

THIS SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

6

Section 704. Severability.

In case any one or more of the provisions contained in this Supplemental Indenture or in the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Supplemental Indenture or of the Notes, but this Supplemental Indenture and the Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

Section 705. Counterparts.

This Supplemental Indenture may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

COMMERCIAL METALS COMPANY

                                       By: /s/ William B. Larson
                                           -------------------------------------
                                           Name: William B. Larson
                                           Title: Vice President and Chief
                                                  Financial Officer

Attest:

/s/ David M. Sudbury
------------------------------------
Name: David M. Sudbury
Title: Vice President, Secretary and
       General Counsel

JPMORGAN CHASE BANK

                                       By: /s/ William G. Keenan
                                           -----------------------
                                           Name: William G. Keenan
                                           Title: Vice President

Attest: /s/ James D. Heaney
       --------------------
Name: James D. Heaney
Title: Vice President

7

APPENDIX A

PROVISIONS RELATING TO INITIAL NOTES
AND EXCHANGE NOTES

1. Definitions.

For the purposes of this Appendix A the following terms shall have the meanings indicated below; capitalized terms used and not defined in this Appendix A shall have the meanings ascribed to such terms in the Indenture:

"Agent Member" means any member of, or participant in, the Depository.

"Definitive Note" means a certificated Initial Note or Exchange Note bearing, if required, the restricted securities legend set forth in Section 2.3(d).

"Depository" means The Depository Trust Company, its nominees and their respective successors.

"Exchange Notes" means (1) the 5.625% Senior Notes due 2013 issued pursuant to the Indenture and the Supplemental Indenture in connection with a Registered Exchange Offer pursuant to the Registration Rights Agreement, and (2) Additional Notes, if any, issued pursuant to a registration statement filed with the Commission under the Securities Act.

"Global Note" means a global Initial Note or Exchange Note bearing the global securities legend set forth in Exhibit 1 or Exhibit 2 to this Appendix A, as the case may be, and, if required, the restricted securities legend set forth in Section 2.3(d).

"IAI" means an institutional "accredited investor" as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act

"Initial Purchasers" means (1) with respect to the Initial Notes issued as of the date of this Supplemental Indenture, Goldman, Sachs & Co., Banc of America Securities LLC, ABN AMRO Incorporated and Tokyo-Mitsubishi International plc., and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related Purchase Agreement.

"Initial Notes" means (1) the 5.625% Senior Notes due 2013 issued under the Indenture and the Supplemental Indenture on about the date hereof, and (2) Additional Notes, if any, issued in a transaction exempt from the registration requirements of the Securities Act.

"Purchase Agreement" means(1) with respect to the Initial Notes issued as of the date of this Supplemental Indenture, the Purchase Agreement, dated November 6, 2003, among the Company and the Initial Purchasers, and (2) with respect to each issuance of Additional Notes, the purchase agreement or underwriting agreement among the Company and the Persons purchasing such Additional Notes.

"QIB" means a "qualified institutional buyer" as defined in Rule 144A.


"Registered Exchange Offer" means (1) with respect to the Initial Notes issued as of the date of this Supplemental Indenture, the offer by the Company, pursuant to the Registration Rights Agreement, to certain Holders of Initial Notes, to issue and deliver to such Holders, in exchange for the Initial Notes, a like aggregate principal amount of Exchange Notes registered under the Securities Act, (2) with respect to each issuance of Additional Notes issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company and the Persons purchasing such Additional Notes under the related Purchase Agreement.

"Registration Rights Agreement" means the Exchange and Registration Rights Agreement, dated November 12, 2003, among the Company and the Initial Purchasers, as such may be amended from time to time.

"Rule 144A" means Rule 144A under the Securities Act (including any successor rule thereto), as the same may be amended from time to time.

"Securities Act" means the Securities Act of 1933, as amended.

"Shelf Registration Statement" means the registration statement filed by the Company in connection with the offer and sale of Initial Notes pursuant to the Registration Rights Agreement.

"Transfer Restricted Securities" means Notes that bear or are required to bear the legend set forth in Section 2.3(d) hereto.

2. The Notes.

2.1 Form and Dating.

(a) General. The Initial Notes are being offered and sold by the Company pursuant to the Purchase Agreement. The Initial Notes will be resold initially only to (1) QIBs in reliance on Rule 144A and (2) IAIs in transactions exempt from the registration requirements of the Securities Act. Initial Notes resold to QIBs in reliance on Rule 144A shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form, which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in the Indenture. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided.

(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Note deposited with or on behalf of the Depository.

The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b) and pursuant to a Company Order, authenticate and deliver initially one or more Global Notes that (i) shall be registered in the name of the Depository for such Global Note or Global Notes or the nominee of such Depository and (ii) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository.


Agent Members shall have no rights under the Indenture and the Supplemental Indenture with respect to any Global Note held on their behalf by the Depository, or by the Trustee as the custodian of the Depository, or under any Global Note, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depository or its nominee, as the case may be, as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

Ownership of beneficial interests in any Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by the Depository or its nominee (with respect to interests of Agent Members) and the records of the Agent Members (with respect to interests of Persons other than Agent Members). None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility of liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

(c) Definitive Notes. Except as provided in this Section 2.1, Section 2.3 or Section 2.4, owners of beneficial interests in Global Notes shall not be entitled to receive physical delivery of certificated Securities. Purchasers of Initial Notes who are IAIs and are not QIBs will receive Definitive Notes; provided, however, that upon transfer of such Definitive Note to a QIB, such Definitive Note will, unless the Global Note has previously been exchanged, be exchanged for an interest in a Global Note pursuant to the provisions of Section 2.3.

2.2 Authentication. The Trustee shall authenticate and deliver:
(1) as of the date of the Supplemental Indenture, Initial Notes for original issue in an aggregate principal amount of $200,000,000, (2) from time to time, any Additional Notes for original issue in aggregate principal amounts specified in an Officers' Certificate pursuant to Section 205 of the Supplemental Indenture, and (3) Exchange Notes for issue only in exchange for Initial Notes surrendered in a Registered Exchange Offer pursuant to the Registration Rights Agreement, for a like principal amount of Initial Notes, in each case upon a Company Order. Such order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated.

2.3 Transfer and Exchange.

(a) Transfer and Exchange of Definitive Notes. When Definitive Notes are presented to the Security Registrar with a request:

(x) to register the transfer of such Definitive Notes; or

(y) to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized denominations,

the Security Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Notes surrendered for transfer or exchange:


(i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and

(ii) if such Definitive Notes are required to bear a restricted securities legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable:

(A) if such Definitive Notes are being delivered to the Security Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect;

(B) if such Definitive Notes are being transferred to the Company, a certification to that effect; or

(C) if such Definitive Notes are being transferred
(x) pursuant to an exemption from registration in accordance with Rule 144A or Rule 144; or (y) in reliance upon another exemption from the requirements of the Securities Act: (i) a certification to that effect (in the form set forth on the reverse of the Note) and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i).

(b) Restrictions on Transfer of a Definitive Note for a Beneficial Interest in a Global Note. A Definitive Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with:

(i) certification, in the form set forth on the reverse of the Note, that such Definitive Note is being transferred to a QIB in accordance with Rule 144A; and

(ii) written instructions directing the Trustee to make, or to direct the custodian of the Notes to make, an adjustment on its books and records with respect to such Global Note to reflect an increase in the aggregate principal amount of the Notes represented by the Global Note, such instructions to contain information regarding the Depository account to be credited with such increase;

then the Trustee shall cancel such Definitive Note and cause, or direct the custodian of the Notes to cause, in accordance with the standing instructions and procedures existing between the Depository and the custodian, the aggregate principal amount of Notes represented by the Global Note to be increased by the aggregate principal amount of the Definitive Note to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Note equal to the principal amount of the Definitive Note so canceled. If no Global Note is then outstanding and the Global Note has not been previously exchanged pursuant to Section 2.4, the Company shall issue and the Trustee shall authenticate, upon a Company Order, a new Global Note in the appropriate principal amount.


(c) Transfer and Exchange of Global Notes.

(i) The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Note shall deliver to the Security Registrar a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Note. The Security Registrar shall, in accordance with such instructions instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Note and to debit the account of the Person making the transfer the beneficial interest in the Global Note being transferred.

(ii) If the proposed transfer is a transfer of a beneficial interest in one Global Note to a beneficial interest in another Global Note, the Security Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Security Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Note from which such interest is being transferred.

(iii) Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

(iv) In the event that a Global Note is exchanged for Definitive Notes pursuant to Section 2.4 of this Appendix A, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Notes intended to ensure that such transfers comply with Rule 144A) and such other procedures as may from time to time be adopted by the Company.

(d) Legend.

(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Note certificate evidencing the Global Notes and the Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form:

THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTORS


(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) BY SUBSEQUENT INVESTORS, AS SET FORTH IN (A) ABOVE, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.

Each Definitive Note will also bear the following additional legend:

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE SECURITY REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH SECURITY REGISTRAR MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

(ii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a Global Note) pursuant to Rule 144 under the Securities Act, the Security Registrar shall permit the transferee thereof to exchange such Transfer Restricted Note for a certificated Note that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Note, if the transferor thereof certifies in writing to the Security Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note).

(iii) After a transfer of any Initial Notes pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Notes all requirements pertaining to legends on such Initial Note will cease to apply, the requirements requiring any such Initial Note issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Note or an Initial Note in global form, in each case without restrictive transfer legends, will be available to the transferee of the Holder of such Initial Notes upon exchange of such transferring Holder's certificated Initial Note or directions to transfer such Holder's interest in the Global Note, as applicable.

(iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Notes, all requirements pertaining to such Initial Notes that Initial Notes issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Notes that do not exchange their Initial Notes, and Exchange Notes in certificated or global form will be available to Holders that exchange such Initial Notes in such Registered Exchange Offer.


(e) Cancellation or Adjustment of Global Note. At such time as all beneficial interests in a Global Note have either been exchanged for Definitive Notes, redeemed, repurchased or canceled, such Global Note shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Notes, redeemed, repurchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the custodian for such Global Note) with respect to such Global Note, by the Trustee or the custodian, to reflect such reduction.

(f) Obligations with Respect to Transfers and Exchanges of Notes.

(i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Notes and Global Notes at the Security Registrar's request.

(ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charge payable in connection therewith.

(iii) The Security Registrar shall not be required to register the transfer of or exchange of (a) any Definitive Note selected for redemption in whole or in part pursuant to Article 3 of this Indenture, except the unredeemed portion of any Definitive Note being redeemed in part, or (b) any Note for a period beginning 15 days before the mailing of a notice of an offer to repurchase or redeem Notes or 15 days before an interest payment date.

(iv) Prior to the due presentation for registration of transfer of any Note, the Company, the Trustee, the Paying Agent, or the Security Registrar may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and premium, if any, and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Trustee, the Paying Agent, or the Security Registrar shall be affected by notice to the contrary.

(v) All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

(g) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders


(which shall be the Depository or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

2.4 Definitive Notes.

(a) A Global Note deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Note or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act and a successor Depository is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes under this Indenture.

(b) Any Global Note that is to be transferred to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee located at its principal corporate trust office, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. Any portion of a Global Note transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depository shall direct. Any Definitive Note delivered in exchange for an interest in a Transfer Restricted Note shall, except as otherwise provided by Section 2.3(d), bear the restricted securities legend set forth therein.

(c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

(d) In the event of the occurrence of one of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company shall promptly make available to the Trustee a reasonable supply of Definitive Notes in definitive, fully registered form without interest coupons.


EXHIBIT 10(i)(a)


PURCHASE AND SALE AGREEMENT

DATED AS OF JUNE 20, 2001

BETWEEN

VARIOUS ENTITIES LISTED ON SCHEDULE I,
AS THE ORIGINATORS

AND

CMC RECEIVABLES, INC.



THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of June 20, 2001, is entered into between VARIOUS ENTITIES LISTED ON SCHEDULE I (each, an "Originator"; and collectively, the "Originators"), and CMC RECEIVABLES, INC., a Delaware corporation (the "Company").

DEFINITIONS

Unless otherwise indicated herein, capitalized terms used in this Agreement are defined in the Receivables Purchase Agreement dated of even date herewith (as the same may be amended, supplemented or otherwise modified from time to time, the "Receivables Purchase Agreement") among the Company, as Seller, Three Rivers Funding Corporation, as Buyer (the "Buyer"), and Commercial Metals Company (herein sometimes referred to as CMC ("CMC")), as Servicer. All references herein to months are to calendar months unless otherwise expressly indicated.

BACKGROUND:

1. The Company is a special purpose corporation, all of the issued and outstanding shares of which are owned by CMC;

2. The Originators generate Receivables in the ordinary course of their businesses;

3. The Originators, in order to finance their respective businesses, wish to sell certain of their Receivables to the Company, and the Company is willing to purchase such Receivables from the Originators, on the terms and subject to the conditions set forth herein; and

4. The Originators and the Company intend this transaction to be a true sale of certain Receivables by each Originator to the Company, providing the Company with the full benefits of ownership of such Receivables, and the Originators and the Company do not intend the transactions hereunder to be characterized as loans from the Company to any Originator.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto hereby agree as follows:

ARTICLE I
AGREEMENT TO PURCHASE AND SELL

SECTION 1.1 Agreement To Purchase and Sell. On the terms and subject to the conditions set forth in this Agreement, each Originator, severally and for itself, agrees to sell to the Company, and the Company agrees to purchase from such Originator, from time to time on or after the Closing Date, but before the Purchase and Sale Termination Date, all of such Originator's right, title and interest in and to:


(a) each Receivable of such Originator (but only if, in the case of CMC, such Receivable was generated by or owing to an Operating Division, and only if, in the case of CMC Steel Fabricators, Inc., such Receivable was generated by the sale of goods or services by its Hope, Arkansas facility), other than Receivables generated by any Obligor that (i) is a government or a government subdivision, affiliate, or agency, (ii) is not a U.S. resident, or
(iii) is listed on Schedule 1.1 attached hereto, which, so long as no Termination Event or Potential Termination Event under the Receivable Purchase Agreement shall have occurred and be continuing, may be amended or supplemented from time to time by any Originator in a writing delivered by the Originator to the Company and the Buyer setting forth the reasons for such amendment or supplement (each such Receivable, a "Purchased Receivable"), that existed and was owing to such Originator at the closing of such Originator's business on May 31, 2001 (the "Cut-off Date"); any Receivable once purchased by the Company will continue to be owned by the Company, notwithstanding any subsequent listing of the Receivable's Obligor on Schedule 1.1 (it being understood and agreed that the effect of listing on Schedule 1.1 pursuant to any such amendment or supplement an Obligor the Receivables of which were previously included in the pool of Purchased Receivables, together with all such previous listings pursuant to amendments or supplements to Schedule 1.1, will not result in the pool of Purchased Receivables, taken as a whole, having credit or collection characteristics which, based solely on the facts known to the Company and the applicable Originator at the time of such amendment or supplement, are reasonably anticipated to be materially worse than those which would have prevailed in the absence of such amendments and supplements; provided, that this parenthetical shall not apply to an amendment or supplement if, after giving effect to the exclusion of all Receivables of Obligors listed on Schedule 1.1 from the existing pool of Purchased Receivables as of the last day of the most recently completed Accounting Period, the aggregate Account Balances of all Purchased Receivables which constitute Eligible Receivables would equal or exceed $200,000,000 and the Buyer's Allocation would be less than or equal to 80%);

(b) each Purchased Receivable generated by such Originator from and including the Cut-off Date to and including the Purchase and Sale Termination Date;

(c) all monies due or to become due to such Originator with respect to any of the foregoing;

(d) all books and records of such Originator related to any of the foregoing, and all Purchase Documents to which such Originator is a party, together with all rights (but not obligations) of such Originator thereunder; and

(e) all products and proceeds of any of the foregoing, including, without limitation, (i) all funds received by such Originator, the Company or CMC, as Servicer (as defined in the Receivables Purchase Agreement and herein so called), from or on behalf of the Obligors in payment of any amounts owed (including, without limitation, invoice price, finance charges, interest and all other charges) in respect of Purchased Receivables; (ii) all amounts (including any insurance proceeds) to be applied by the Company or the Servicer to any amount owed in respect of any Purchased Receivable; and (iii) all net proceeds of sale or other disposition of repossessed goods or

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other collateral or property of the Obligors in respect of Purchased Receivables or any other parties directly or indirectly liable for payment of such Purchased Receivables.

All purchases shall be made without recourse, but shall be made pursuant to, and in reliance upon, the representations, warranties and covenants of the Originators set forth in this Agreement and in each other Purchase Document. No obligation or liability to any Obligor on any Purchased Receivable is intended to be assumed by the Company hereunder, and any such assumption is expressly disclaimed. The Company's foregoing commitment to purchase Purchased Receivables and the proceeds and rights described in clauses (c) through (e) (collectively, the "Related Rights") is herein called the "Purchase Facility."

SECTION 1.2 Timing of Purchases.

(a) Closing Date Purchases. Each Purchased Receivable and Related Rights generated by each Originator prior to the Cut-off Date shall be deemed to have been sold by such Originator to the Company on the Closing Date.

(b) Subsequent Purchases. After the Closing Date, until the Purchase and Sale Termination Date, each Purchased Receivable and the Related Rights generated by each Originator shall be deemed to have been sold by such Originator to the Company immediately (and without further action) upon the creation of such Purchased Receivable.

SECTION 1.3 Consideration for Purchases. On the terms and subject to the conditions set forth in this Agreement, the Company agrees to make Purchase Price payments to the Originators in accordance with Article III.

SECTION 1.4 Purchase and Sale Termination Date. The "Purchase and Sale Termination Date" shall be the earliest to occur of (a) the date the Purchase Facility is terminated pursuant to Section 8.2 and (b) the Payment Date 10 days following the day on which Originators shall have given written notice to the Company at or prior to 10:00 a.m. (Dallas, Texas time) that the Originators desire to terminate this Agreement; provided, that in either case the Company shall have satisfied all of its obligations under the Receivables Purchase Agreement and such agreement shall have been terminated in accordance with its terms.

SECTION 1.5 Intention of the Parties. It is the express intent of the parties hereto that the sale and transfers of the Purchased Receivables and Related Rights by the Originators to the Company, as contemplated by this Agreement, shall be treated as sales (without recourse except as provided herein) of all of the Originators' right, title and interest in, to and under the Purchased Receivables and Related Rights, and not as loans secured by the Purchased Receivables and Related Rights. If, however, notwithstanding the intent of the parties, such transactions are deemed to be loans, each Originator hereby grants to the Company a first priority security interest in all of such Originator's right, title and interest in and to (i) the Purchased Receivables and the Related Rights now existing and hereafter created by such Originator,
(ii) all monies due or to become due and all

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amounts received with respect thereto, (iii) all books and records of such Originator related to any of the foregoing, and all Purchase Documents to which such Originator is a party, together with all rights (but not obligations) of such Originator thereunder, and (iv) all products and proceeds of any of the foregoing.

SECTION 1.6 Additional Originators. Additional Persons may be added as Originators hereunder, with the prior written consent of the Company and Mellon Bank, N.A. (the "Administrator"), which consent may be given or withheld in each of the Company's and the Administrator's sole discretion; provided, that the following conditions are satisfied on or before the date of such addition:

(a) The Servicer shall have given the Administrator and the Company at least ten Business Days prior written notice of such proposed addition and the identity of the proposed additional Originator and shall have provided such other information with respect to such proposed additional Originator as the Administrator may reasonably request;

(b) such proposed additional Originator has executed and delivered to the Company and the Administrator an agreement substantially in the form attached hereto as Exhibit C (a "Joinder Agreement");

(c) such proposed additional Originator has delivered to the Company and the Administrator each of the documents with respect to such Originator described in Sections 4.1 and 4.2;

(d) the receivables intended to be sold by such additional Originator to the Company hereunder shall be Purchased Receivables; and

(e) no Purchase and Sale Termination Event shall have occurred and be continuing.

ARTICLE II
PURCHASE REPORT; CALCULATION OF PURCHASE PRICE

SECTION 2.1 Purchase Report. On the Closing Date and at least two (2) Business Days prior to each Settlement Date, the Servicer shall deliver to the Company and each Originator a report in substantially the form of Exhibit A (each such report being herein called a "Purchase Report") setting forth, among other things:

(a) Purchased Receivables purchased by the Company from each Originator on the Closing Date (in the case of the Purchase Report to be delivered on the Closing Date);

(b) Purchased Receivables purchased by the Company from each Originator during the most recently completed Accounting Period;

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(c) the calculation of the Purchase Price for all Purchased Receivables; and

(d) the calculation of any reductions of the Purchase Price for any Purchased Receivables as provided in Sections 3.3 (a), (b) and (c).

SECTION 2.2 Calculation of Purchase Price. The "Purchase Price" to be paid to each Originator for each Purchased Receivable that is purchased hereunder from such Originator shall be equal to the product of (a) the Account Balance of such Purchased Receivable on the relevant Payment Date and (b) the difference, expressed as a percentage, of (i) one minus (ii) the Fair Market Value Discount on the relevant Payment Date.

As used herein, "Fair Market Value Discount" means 2.0094%, as such percentage may be increased, decreased or otherwise adjusted by the Company from time to time (without retroactive effect) and with the prior consent of each Originator, such consent not to be unreasonably withheld; and "Payment Date" means (i) the Closing Date and (ii) each Business Day thereafter that Originators are open for business.

SECTION 2.3 Payment of Fees. Each Originator hereby agrees to pay to the Company its Pro Rata Share of all reasonable fees and expenses now or hereafter incurred by the Company in connection with this Agreement, including but not limited to all attorneys', directors' and facility fees and expenses (including without limitation any Program Fees and other costs, indemnities, and expenses incurred by the Company under, and any "deemed collections" of the Company pursuant to Sections 5.03(c) or 6.04 of, the Receivables Purchase Agreement).

As used herein, "Pro Rata Share" means, at any time as to any Originator, the ratio of (i) the sum of the Account Balances of the Purchased Receivables from such Originator, to (ii) the aggregate Account Balances of all Purchased Receivables from all Originators.

ARTICLE III
PAYMENT OF PURCHASE PRICE

SECTION 3.1 Initial Purchase Price Payment. On the terms and subject to the conditions set forth in this Agreement, the Company agrees to pay to each Originator the Purchase Price for the purchase to be made from such Originator on the Closing Date partially in cash (in an amount to be agreed between the Company and such Originator and set forth in the initial Purchase Report) and partially by issuing a promissory note in the form of Exhibit B to such Originator with an initial principal balance equal to the remaining Purchase Price (each such promissory note, as it may be amended, supplemented, endorsed or otherwise modified from time to time, together with all promissory notes issued from time to time in substitution therefor or renewal thereof in accordance with the Purchase Documents, being herein called a "Company Note").

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SECTION 3.2 Subsequent Purchase Price Payments. On each Payment Date subsequent to the Closing Date, on the terms and subject to the conditions set forth in this Agreement, the Company shall pay to each Originator the Purchase Price for the Purchased Receivables generated by such Originator on such Payment Date:

(a) First, in cash to the extent the Company has cash available therefor; and

(b) Second, to the extent any portion of the Purchase Price remains unpaid, the principal amount outstanding under the applicable Company Note shall be increased by an amount equal to such remaining Purchase Price.

The Servicer shall make all appropriate record keeping entries with respect to each of the Company Notes to reflect the foregoing payments and reductions made pursuant to Section 3.3, and the Servicer's books and records shall constitute rebuttable presumptive evidence of the principal amount of, and accrued interest on, each Company Note at any time. Furthermore, the Servicer shall hold the Company Notes for the benefit of the applicable Originator. Each Originator hereby irrevocably authorizes the Servicer to mark the Company Notes "CANCELED" and to return such Company Notes to the Company upon the final payment thereof after the Purchase and Sale Termination Date.

SECTION 3.3 Settlement as to Specific Purchased Receivables and Dilution.

(a) If, on the day of purchase of any Purchased Receivable from an Originator hereunder, any of the representations or warranties set forth in Sections 5.4, 5.12 and 5.21 are not true with respect to such Purchased Receivable or as a result of any action or inaction of such Originator, on any subsequent day, any of such representations or warranties set forth in Sections 5.4, 5.12 and 5.21 is no longer true with respect to such Purchased Receivable, then the Purchase Price with respect to such Purchased Receivable shall be reduced by an amount equal to the Account Balance of such Purchased Receivable and shall be accounted to such Originator as provided in clause (d) below; provided, that if the Company thereafter receives payment on account of Collections due with respect to such Purchased Receivable, the Company promptly shall deliver such funds to such Originator.

(b) If, on any day, the Account Balance of any Purchased Receivable purchased hereunder is reduced or adjusted as a result of any defective, rejected, returned goods or services, or any discount or other adjustment made by any Originator, the Company or the Servicer or any setoff or dispute between any Originator or the Servicer and an Obligor as indicated on the books of the Company (or, for periods prior to the Closing Date, the books of such Originator), then the Purchase Price with respect to such Purchased Receivable shall be reduced by the amount of such net reduction and shall be accounted to such Originator as provided in clause (d) below.

(c) If, on any day, the Company incurs any costs, indemnities, expenses or deemed collections set forth in Section 2.3 herein, then the Purchase Price of the Purchased

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Receivables shall be reduced with respect to each Originator in an amount equal to such Originator's Pro Rata Share of such reduction or, in the case of a reduction that is solely attributable to an Originator, shall be reduced with respect to such Originator, and shall be accounted to any such Originator as provided in clause (d) below.

(d) Any reduction in the Purchase Price of any Purchased Receivable pursuant to clause (a), (b) or (c) above shall be applied as a credit for the account of the Company against the Purchase Price of Receivables subsequently purchased by the Company from such Originator hereunder; provided, however if there have been no purchases of Purchased Receivables from such Originator (or insufficiently large purchases of Purchased Receivables) to create a Purchase Price sufficient to so apply such credit against, the amount of such credit shall be deemed to be a payment under, and shall be deducted from the principal amount outstanding under, the Company Note payable to such Originator.

SECTION 3.4 Reconveyance of Purchased Receivables. In the event that an Originator has paid to the Company the full Account Balance of any Purchased Receivable pursuant to Section 3.3, the Company shall reconvey such Purchased Receivable to such Originator, without representation or warranty, but free and clear of all liens, security interests, charges, and encumbrances created by the Company.

ARTICLE IV
CONDITIONS OF PURCHASES

SECTION 4.1 Conditions Precedent to Initial Purchase. The initial purchase hereunder is subject to the condition precedent that the Servicer (on the Company's behalf) shall have received, on or before the Closing Date, the following, each (unless otherwise indicated) dated the Closing Date, and each in form and substance satisfactory to the Servicer (acting on the Company's behalf):

(a) A copy of the resolutions of the Board of Directors of each Originator approving the Purchase Documents to be delivered by it and the transactions contemplated hereby and thereby, certified by the Secretary or Assistant Secretary of such Originator;

(b) Good standing certificates for each Originator issued as of a recent date acceptable to the Servicer by the Secretary of State of the jurisdiction of such Originator's incorporation;

(c) A certificate of the Secretary or Assistant Secretary of each Originator certifying the names and true signatures of the officers authorized on such Person's behalf to sign the Purchase Documents to be delivered by it (on which certificate the Servicer and the Company may conclusively rely until such time as the Servicer shall receive from such Person a revised certificate meeting the requirements of this clause (d));

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(d) The certificate or articles of incorporation of each Originator, together with a copy of the by-laws of such Originator, each duly certified by the Secretary or an Assistant Secretary of such Originator;

(e) Originals of the proper financing statements (Form UCC-1) that have been duly executed and name each Originator as the debtor/seller and the Company as the secured party/purchaser (and Three Rivers Funding Corporation, as assignee of the Company) of the Purchased Receivables generated by such Originator as may be necessary or desirable under the UCC of all appropriate jurisdictions to perfect the Company's ownership interest in all Purchased Receivables and such other rights, accounts, instruments and moneys in which an ownership or security interest may be assigned to it hereunder;

(f) A written search report from a Person satisfactory to the Servicer listing all effective financing statements that name the Originators as debtors or sellers and that are filed in the jurisdictions in which filings were made pursuant to the foregoing clause (f), together with copies of such financing statements (none of which, except for those described in the foregoing clause (f), shall cover any Purchased Receivable or any Related Rights which are to be sold to the Company hereunder), and tax and judgment lien search reports from a Person satisfactory to the Servicer showing no evidence of such liens filed against any Originator;

(g) Favorable opinions of (a) David M. Sudbury, General Counsel of CMC, and (b) Haynes and Boone, LLP, counsel to the Originators and the Company, in form and substance satisfactory to the Servicer and the Administrator; and

(h) A Company Note in favor of each Originator, duly executed by the Company.

SECTION 4.2 Certification as to Representations and Warranties. Each Originator, by accepting the Purchase Price related to each purchase of Purchased Receivables generated by such Originator and listed in a Purchase Report, shall be deemed to have certified that the representations and warranties contained in Article V are true and correct on and as of such day, with the same effect as though made on and as of such day.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR

In order to induce the Company to enter into this Agreement and to make purchases hereunder, each Originator hereby makes, with respect to itself, the representations and warranties set forth in this Article V.

SECTION 5.1 Organization and Good Standing. Such Originator has been duly incorporated and is validly existing as a corporation, in good standing under the laws of its jurisdiction of incorporation, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted.

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SECTION 5.2 Due Qualification. Such Originator is located and is qualified to transact business as a foreign corporation and is in good standing in all jurisdictions in which (a) the ownership or lease of its property or the conduct of its business requires such licensing or qualifica tion and (b) the failure to be so licensed or qualified could have a Material Adverse Effect.

SECTION 5.3 Power and Authority; Due Authorization. Such Originator has
(a) all necessary power, authority and legal right to (i) execute and deliver, and perform its obligations under, each Purchase Document to which it is a party and (ii) generate, own, sell, contribute and assign Receivables on the terms and subject to the conditions herein and therein provided, and (b) duly authorized such execution and delivery and such sale and assignment and the performance of such obligations by all necessary corporate action.

SECTION 5.4 Valid Sale; Binding Obligations. Each sale of Purchased Receivables made by such Originator pursuant to this Agreement shall constitute a valid sale, transfer, and assignment of Purchased Receivables to the Company, enforceable against creditors of, and purchasers from, such Originator; and this Agreement constitutes, and each other Purchase Document to be signed by such Originator, when duly executed and delivered, will constitute, a legal, valid, and binding obligation of such Originator, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

SECTION 5.5 No Violation. The consummation of the transactions contemplated by this Agreement and the other Purchase Documents, and the fulfillment of the terms hereof or thereof, will not (a) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under (i) such Originator's certificate or articles of incorporation or bylaws, or (ii) any indenture, loan agreement, mortgage, deed of trust, or other agreement or instrument to which it is a party or by which it is bound, (b) result in the creation or imposition of any Adverse Claim upon any of its properties pursuant to the terms of any such indenture, loan agreement, mortgage, deed of trust, or other agreement or instrument, other than the Purchase Documents, or (c) violate any law or any order, rule or regulation applicable to it of any court or of any state or foreign regulatory body, administrative agency, or other governmental instru mentality having jurisdiction over it or any of its properties that could have a material adverse effect on such Originator's ability to perform its obligations under this Agreement (a "Material Adverse Effect").

SECTION 5.6 Proceedings. Except as set forth in Schedule 5.6 or as otherwise disclosed in CMC's public filings with the Securities and Exchange Commission, there is no action, suit, proceeding or investigation pending before any court, regulatory body, arbitrator, administrative agency, or other tribunal or governmental instrumentality (a) asserting the invalidity of any Purchase Document, (b) seeking to prevent such Originator from transferring any Purchased Receivable hereunder (or in the case such transfer does not constitute a sale under any applicable law, from

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granting or maintaining the security interest in any Purchased Receivable) to the Purchaser or the consummation of any of the transactions contemplated by any Purchase Document, or (c) seeking any determination or ruling that could have a Material Adverse Effect.

SECTION 5.7 Bulk Sales Acts. No transaction contemplated hereby requires compliance with, or will be subject to avoidance under, any bulk sales act or similar law.

SECTION 5.8 Government Approvals. Except for the filing of the UCC financing statements referred to in Article IV, all of which, at the time required in Article IV, shall have been duly made and shall be in full force and effect, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for each Originator's due execution, delivery and performance of any Purchase Document to which it is a party.

SECTION 5.9 Financial Condition.

(a) Material Adverse Effect. Since February 28, 2001, no event has occurred that has had, or is reasonably likely to have, a Material Adverse Effect.

(b) Solvent. On the date hereof, and on the date of each purchase hereunder (both before and after giving effect to such purchase), (i) the fair market value of such Originator's assets exceeds its liabilities
(whether contingent, subordinated, unmatured, unliquidated or otherwise), (ii) such Originator has sufficient cash flow to enable it to pay its debt as it matures, and (iii) such Originator does not have unreasonably small capital to conduct its business.

SECTION 5.10 Licenses, Contingent Liabilities, and Labor Controversies.

(a) Such Originator has not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its properties or to the conduct of its business, which violation or failure to obtain could have a Material Adverse Effect.

(b) There are no labor controversies pending against such Originator that have had (or could have) a Material Adverse Effect.

SECTION 5.11 Margin Regulations. No use of any funds acquired by Originator under this Agreement will conflict with or contravene any of Regulations, T, U and X promulgated by the Federal Reserve Board from time to time.

SECTION 5.12 Quality of Title.

(a) Each Purchased Receivable of such Originator (together with the Related Rights with respect to such Purchased Receivable) which is to be sold to the Company hereunder is or shall be owned by such Originator, free and clear of any lien, security interest or other charge

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or encumbrance, or any other type of preferential arrangement (each, an "Adverse Claim"), except as provided herein and in the Receivables Purchase Agreement. Whenever the Company makes a purchase hereunder, it shall have acquired and shall continue to have maintained a valid and perfected ownership interest (free and clear of any Adverse Claim) in all Purchased Receivables generated by such Originator and all Collections related thereto, and in Originator's entire right, title and interest in and to the Related Rights with respect thereto.

(b) No effective financing statement or other instrument similar in effect covering any Purchased Receivable generated by such Originator or any Related Rights is on file in any recording office except such as may be filed in favor of the Company or the Originators, as the case may be, in accordance with this Agreement or in favor of Three Rivers Funding Corporation in accordance with the Receivables Purchase Agreement.

(c) Each Purchased Receivable purchased hereunder is on the date of purchase an Eligible Receivable.

SECTION 5.13 Accuracy of Information. All factual written information heretofore or contemporaneously furnished (and prepared) by such Originator to the Company, the Administrator or the Buyer for purposes of or in connection with any Purchase Document or any transaction contemplated hereby or thereby is, and all other such factual written information hereafter furnished by such Originator to the Company or the Administrator pursuant to or in connection with any Purchase Document will be, true and accurate in all material respects on the date as of which such information is dated or certified.

SECTION 5.14 Offices. Such Originator's principal place of business and chief executive office is located at the address set forth in Schedule 5.14A, and the offices where such Originator keeps all its books, records and documents evidencing its Purchased Receivables, the related Contracts and all other agreements related to such Purchased Receivables are located at the addresses specified in Schedule 5.14B (or at such other locations, notified to the Servicer and the Buyer in accordance with Section 6.1(f), in jurisdictions where all action required by Section 7.3 has been taken and completed).

SECTION 5.15 Trade Names. Such Originator does not use any trade name other than its actual corporate name and the trade names set forth in Schedule
5.15. From and after the date that fell five (5) years before the date hereof, except as set forth in Schedule 5.15, such Originator has not been known by any legal name other than its corporate name as of the date hereof, nor has such Originator been the subject of any merger or other corporate reorganization.

SECTION 5.16 Taxes. Such Originator has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

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SECTION 5.17 Compliance with Applicable Laws. Such Originator is in compliance with the requirements of all applicable laws, rules, regulations and orders of all governmental authorities, a breach of any of which, individually or in the aggregate, could have a Material Adverse Effect.

SECTION 5.18 Reliance on Separate Legal Identity. Such Originator acknowledges that Three Rivers Funding Corporation is entering into the Receivables Purchase Agreement in reliance upon the Company's identity as a legal entity separate from such Originator.

SECTION 5.19 No Termination Event. No event has occurred and is continuing and no condition exists which constitutes a Termination Event or a Potential Termination Event under the Receivables Purchase Agreement.

SECTION 5.20 Not an Investment Company. Each Originator is not, and will not become as a result of the transactions contemplated by the Purchase Documents, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

SECTION 5.21 Account Balances; Purchase Notice. The Account Balances related to the sale of the Purchased Receivables are the respective amounts set forth in the Purchase Report, and all information set forth therein, is true and correct in all material respects as of such Settlement Date.

SECTION 5.22 Consideration. Each Originator has sold the Purchased Receivables in exchange for payment (made by the Company in accordance with the provisions herein) in an amount which constitutes fair consideration and approximate market value for the Purchased Receivables and in a sale the terms and conditions of which (including, without limitation, the purchase price thereof) reasonably approximate an arm's-length transaction between unaffiliated parties. No such sale has been made for or on account of an antecedent debt owed to the Company and no such sale is or may be voidable or subject to avoidance under any section of the U.S. Bankruptcy Code.

SECTION 5.23 Data Processing Legends. Each Originator and the Servicer have placed on the most recent, and have taken all steps reasonably necessary to ensure that there shall be placed on each subsequent, data processing report generated for such Originator which are of the type that a proposed purchaser or lender would use to evaluate the Purchased Receivables, the following legend (or the substantive equivalent thereof): "CERTAIN OF THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD PURSUANT TO A PURCHASE AND SALE AGREEMENT DATED AS OF JUNE 20, 2001, AS THE SAME MAY FROM TO TIME TO TIME BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED, BETWEEN CERTAIN ENTITIES LISTED ON SCHEDULE I THERETO AND CMC RECEIVABLES, INC., AND AN UNDIVIDED, FRACTIONAL OWNERSHIP INTEREST IN SUCH RECEIVABLES

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DESCRIBED HEREIN HAS BEEN SOLD TO THREE RIVERS FUNDING CORPORATION PURSUANT TO THE RECEIVABLES PURCHASE AGREEMENT DATED AS OF JUNE 20, 2001, AS THE SAME MAY FROM TO TIME TO TIME BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED, AMONG CMC RECEIVABLES, INC., THREE RIVERS FUNDING CORPORATION AND COMMERCIAL METALS COMPANY."

ARTICLE VI
COVENANTS OF THE ORIGINATORS

SECTION 6.1 Affirmative Covenants. From the date hereof until the first day following the Purchase and Sale Termination Date, each Originator will, unless the Company, acting in a manner consistent with its duties and responsibilities under the Receivables Purchase Agreement shall otherwise consent:

(a) Compliance with Laws, Etc. Comply in all material respects with all applicable laws, rules, regulations and orders with respect to the Purchased Receivables generated by it and the Contracts and other agreements related thereto.

(b) Preservation of Corporate Existence. Preserve and maintain its existence as a corporation, and all rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification could have a Material Adverse Effect.

(c) Receivables Examinations. (i) At any time and from time to time during regular business hours, upon reasonable prior notice, and at each Originator's expense, as applicable, permit the Company or the Administrator, or their respective agents or representatives, (A) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes, disks and other electronic media) in possession or under the control of each Originator relating to Purchased Receivables, including, without limitation, the related Contracts and purchase orders and other agreements related thereto, and (B) to visit the offices and properties of such Originator for the purpose of examining such materials described in clause
(i)(A) next above and to discuss matters relating to Purchased Receivables originated by it or the performance hereunder with any of the officers or employees of each Originator having knowledge of such matters, and (ii) without limiting the foregoing clause (i) above, from time to time on reasonable request of the Administrator, permit certified public accountants or other auditors acceptable to the Company and Administrator to conduct, at the Company's expense, certain agreed upon procedures with regard to such Originator's books and records pertaining to such Purchased Receivables.

(d) Keeping of Records and Books of Account. Maintain and implement administrative and operating procedures (including, without limitation, an ability to re-create records evidencing Purchased Receivables it generates in the event of the destruction of the originals

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thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of such Purchased Receivables (including, without limitation, records adequate to permit the daily identification of each new Purchased Receivable and all Collections of and adjustments to each existing Purchased Receivable).

(e) Performance and Compliance with Purchased Receivables and Contracts. Timely and fully perform and comply, in all material respects, with all provisions, covenants and other promises required to be observed by it under the Contracts and all other agreements related to the Purchased Receivables that it generates.

(f) Location of Records. Keep its principal place of business and chief executive office, and the offices where it keeps its records concerning or related to Purchased Receivables, at the address(es) referred to in Schedule 5.14 or, upon 15 days' prior written notice to the Company and the Administrator, at such other locations in jurisdictions where all action required by Section 7.3 shall have been taken and completed.

(g) Credit and Collection Policies. Comply in all material respects with its Credit and Collection Policy in connection with the Purchased Receivables that it generates and all Contracts and other agreements related thereto.

(h) Purchase Documents. Comply in all material respects with the Purchase Documents to which it is a party.

(i) Notice of Material Adverse Change. Promptly upon becoming aware thereof, each Originator shall give the Company and the Buyer notice of any material adverse change in the business, operations or financial condition of such Originator which could affect adversely the collectibility of the Purchased Receivables or the ability to service the Purchased Receivables.

(j) Customer List. Each Originator shall at all times maintain (or cause the Servicer to maintain) a current list (which may be stored on magnetic tapes or disks or other form of electronic media) of all Obligors under Contracts related to Purchased Receivables, including the name, address, telephone number and account number of each such Obligor, Such Originator shall deliver or cause to be delivered a copy of such list to the Buyer as soon as practicable following the their request.

(k) Notice of Relocation. Each Originator shall give the Buyer sixty (60) days' prior written notice of any relocation of its Chief Executive Office if, as a result of such relocation, the applicable provisions of the Uniform Commercial Code of any applicable jurisdiction or other applicable Laws would require the filing of any amendment of any previously filed financing statement or continuation statement or of any new financing statement. Each Originator will at all times maintain its Chief Executive Office within a jurisdiction in the United States in which Article Nine of the Uniform Commercial Code (1972 or later revision) is in effect.

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(l) Administrative and Operating Procedures. Each Originator shall maintain and implement administrative and operating procedures adequate to permit the identification of the Receivables Pool and all collections and adjustments attributable to each Receivables Pool.

(m) Certificates of Title.

(A) If any amount payable under or in connection with any Purchased Receivable shall be or become evidenced by any promissory note, chattel paper or other instrument, such note, chattel paper or instrument shall be duly endorsed in a manner satisfactory to the Company and delivered to the Company or its agent.

(B) Each Originator shall deliver to the Company any certificate of title or other evidence of ownership issued by the United States or any state or any political subdivision thereof relating to any chattel held as security for any amount payable under or in connection with any Purchased Receivable, with evidence of perfection of the security interest in such property noted thereon, if such notation is required under the laws of the jurisdiction in which such property is located in order to perfect a security interest in such property.

(C) If the Contract relating to any Purchased Receivable requires the related Obligor to maintain insurance upon the chattel security relating to such Contract, such Originator shall deliver to the Company all documents or certificates relating to such insurance.

(D) Such Originator shall deliver to the Company any other document required by the terms of the related Contracts.

SECTION 6.2 Reporting Requirements. From the date hereof until the first day following the Purchase and Sale Termination Date, each Originator will, unless the Servicer (on behalf of the Company) and the Buyer shall otherwise consent in writing, furnish to the Company and the Buyer:

(a) Purchase and Sale Termination Events. As soon as possible after the Originator has knowledge of the occurrence of, and in any event within three Business Days after the Originator has knowledge of the occurrence of, each Purchase and Sale Termination Event or each event which, with the giving of notice or the passage of time, or both, would constitute a Purchase and Sale Termination Event (a "Potential Purchase and Sale Termination Event") in respect of such Originator, the statement of the chief financial officer or chief accounting officer of such Originator describing such Purchase and Sale Termination Event or Potential Purchase and Sale Termination Event, and the action that such Originator proposes to take with respect thereto, in each case in reasonable detail;

(b) Proceedings. As soon as possible and in any event within three Business Days

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after Originator otherwise has knowledge thereof, written notice of (i) material litigation, investigation or proceeding of the type described in Section 5.6 not previously disclosed to the Company and (ii) all adverse developments that have occurred with respect to any previously disclosed litigation, proceedings and investigations that could have a Material Adverse Effect; and

(c) Other. Promptly, from time to time, such other information, documents, records or reports respecting the Purchased Receivables as the Administrator may from time to time reasonably request in order to protect the interests of the Company, the Buyer or the Administrator with respect to the Purchased Receivables.

SECTION 6.3 Negative Covenants. From the date hereof until the date following the Purchase and Sale Termination Date, each Originator agrees that, unless the Servicer (on behalf of the Company and acting in a manner consistent with its duties and responsibilities under the Receivables Purchase Agreement), shall otherwise consent, it shall not:

(a) Sales, Liens, Etc. Except as otherwise provided herein or in any other Purchase Document, sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim or any Collections with respect to any Purchased Receivable, or assign any right to receive income in respect thereof.

(b) Extension or Amendment of Purchased Receivables. Extend, amend or otherwise modify the terms of any Purchased Receivable in any material respect generated by it, or amend, modify or waive, in any material respect, any Contract related thereto (which term or condition relates to payments under, or the enforcement of, such Contract), except for any extension, amendment or modification that is permitted under the Receivables Purchase Agreement and is consistent with its Credit and Collection Policy.

(c) Change in Business or Credit and Collection Policy. Make any change in the character of its business or materially alter its Credit and Collection Policy, which change or alteration could, in either case, materially adversely change the credit standing required of particular Obligors or potential Obligors or impair the collectibility of a material portion of Purchased Receivables generated by it.

(d) Purchased Receivables Not to be Evidenced by Promissory Notes or Chattel Paper. Take any action to cause or permit any Purchased Receivable generated by it to become evidenced by any "instrument" or "chattel paper" (as defined in the applicable UCC).

(e) Mergers, Acquisitions, Sales, etc. (i) Be a party to any merger or consolidation, except a merger or consolidation where such Originator is the surviving entity or is merged or consolidated with another Originator, or
(ii) directly or indirectly sell, transfer, assign, convey or lease (other than to another Originator or wholly-owned subsidiary thereof) (A) whether in one or a series of transactions, all or substantially all of its assets or (B) any Purchased Receivables or any interest therein (other than pursuant to this Agreement).

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SECTION 6.4 Permitted Lockbox Banks. Make any changes in its instructions to Obligors regarding Collections or add or terminate any bank as a Permitted Lockbox Bank unless the requirements of Section 9.02(f) of the Receivables Purchase Agreement have been met.

SECTION 6.5 Accounting for Purchases. Account for or treat the transactions contemplated hereby in any manner other than as sales of the Purchased Receivables and Related Rights by such Originator to the Company.

SECTION 6.6 Substantive Consolidation. Each Originator hereby acknowledges that this Agreement and the other Purchase Documents are being entered into in reliance upon the Company's identity as a legal entity separate from such Originator and its Affiliates. Therefore, from and after the date hereof, each Originator shall take all reasonable steps necessary (including without limitation all of the steps set forth in Section 9.01(f) of the Receivables Purchase Agreement) to make it apparent to third Persons that the Company is an entity with assets and liabilities distinct from those of such Originator and any other Person, and is not a division of such Originator, its Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the other covenants set forth herein, such Originator shall take such actions as shall be required in order that:

(a) such Originator shall not be involved in the day to day management of the Company;

(b) such Originator shall maintain separate corporate records and books of account from the Company and otherwise will observe corporate formalities;

(c) the financial statements and books and records of such Originator shall be prepared after the date of creation of the Company to reflect and shall reflect the separate existence of the Company;

(d) except as permitted by the Receivables Purchase Agreement,
(i) such Originator shall maintain its assets separately from the assets of the Company, and (ii) the Company's assets, and records relating thereto, have not been, are not, and shall not be, commingled with those of the Company;

(e) all of the Company's business correspondence and other communications shall be conducted in the Company's own name and on its own stationery;

(f) such Originator shall not act as an agent for the Company, other than as Servicer or its subservicer under the Receivables Purchase Agreement, and in connection therewith, shall present itself to the public as an agent for the Company and a legal entity separate from the Company;

(g) such Originator shall not conduct any of the business of the Company in its own name;

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(h) such Originator shall not pay any liabilities of the Company out of its own funds or assets;

(i) such Originator shall maintain an arm's-length relationship with the Company;

(j) such Originator shall not assume or guarantee or become obligated for the debts of the Company or hold out its credit as being available to satisfy the obligations of the Company;

(k) such Originator shall not acquire obligations of the Company;

(l) such Originator shall allocate fairly and reasonably overhead or other expenses that are properly shared with the Company, including, without limitation, shared office space;

(m) such Originator shall identify and hold itself out as a separate and distinct entity from the Company;

(n) such Originator shall not enter into, or be a party to, any transaction with the Company, except in the ordinary course of its business and on terms which are intrinsically fair and not less favorable to it than would be obtained in a comparable arm's-length transaction with an unrelated third party; and

(o) such Originator shall not pay the salaries of the Company's employees, if any.

ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF PURCHASED RECEIVABLES

SECTION 7.1 Rights of the Company. Each Originator hereby authorizes the Company, the Servicer or their respective designees to take any and all steps in such Originator's name necessary or desirable, in their respective determination, to collect all amounts due under any and all Purchased Receivables, including, without limitation, indorsing the name of such Originator on checks and other instruments representing Collections and enforcing such Purchased Receivables and the provisions of the related Contracts that concern payment and/or enforcement of rights to payment.

SECTION 7.2 Responsibilities of the Originators. Anything herein to the contrary notwithstanding:

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(a) Collection Procedures. Each Originator agrees to direct its respective Obligors to make payments of Purchased Receivables directly to a post office box related to the relevant Lockbox Account at a Permitted Lockbox Bank. Each Originator further agrees to transfer any Collections that it receives directly to the Servicer (for the Company's account) within one (1) Business Day of receipt thereof, and agrees that all such Collections shall be deemed to be received in trust for the Company and shall be maintained and segregated separate and apart from all other funds and monies of Originator until transfer of such Collections to the Servicer.

(b) Each Originator shall perform its obligations hereunder, and the exercise by the Company or its designee of its rights hereunder shall not relieve such Originator from such obligations.

(c) None of the Company, the Servicer or the Administrator shall have any obligation or liability to any Obligor or any other third Person with respect to any Purchased Receivables, Contracts related thereto or any other related agreements, nor shall the Company, the Servicer, the Buyer or the Administrator be obligated to perform any of the obligations of such Originator thereunder.

(d) Each Originator hereby grants to the Servicer an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of such Originator all steps necessary or advisable to endorse, negotiate or otherwise realize on any writing or other right of any kind held or transmitted by such Originator or transmitted or received by the Company (whether or not from such Originator) in connection with any Purchased Receivable.

SECTION 7.3 Further Action Evidencing Purchases. Each Originator agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action that the Servicer may reasonably request in order to perfect, protect or more fully evidence the Purchased Receivables and Related Rights purchased by the Company hereunder, or to enable the Company to exercise or enforce any of its rights hereunder or under any other Purchase Document. Without limiting the generality of the foregoing, upon the request of the Servicer, such Originator will:

(a) execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate; and

(b) mark the master data processing records that evidence or list (i) such Purchased Receivables and (ii) related Contracts with the legend set forth in Section 5.23.

Each Originator hereby authorizes the Company or its designee to file one or more financing or continuation statements, and amendments thereto and assignments thereof, relative to all or any of the Purchased Receivables and Related Rights now existing or hereafter generated by Originator. If any Originator fails to perform any of its agreements or obligations under this Agreement, the

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Company or its designee may (but shall not be required to) itself perform, or cause the performance of, such agreement or obligation, and the expenses of the Company or its designee incurred in connection therewith shall be payable by Originator as provided in Section 9.1.

SECTION 7.4 Application of Collections. Any payment by an Obligor in respect of any indebtedness owed by it to any Originator in connection with a Purchased Receivable shall, except as otherwise specified by such Obligor or required by applicable law and unless otherwise instructed by the Servicer (with the prior written consent of the Administrator) or the Administrator, be applied as a Collection of any such Purchased Receivable of such Obligor to the extent of any amounts then due and payable thereunder before being applied to any other indebtedness of such Obligor.

ARTICLE VIII
PURCHASE AND SALE TERMINATION EVENTS

SECTION 8.1 Purchase and Sale Termination Events. Each of the following events or occurrences described in this Section 8.1 shall constitute a "Purchase and Sale Termination Event":

(a) A Termination Event shall have occurred and, except for the Termination Event described in Section 10.01(j) of the Receivables Purchase Agreement, the Buyer shall have declared the Purchase and Sale Termination Date to have occurred; or

(b) Any Originator shall fail to make any payment or deposit to be made by it hereunder when due; or

(c) Any representation or warranty made or deemed to be made by any Originator (or any of its officers) under or in connection with this Agreement, any other Purchase Documents, or any other information or report delivered pursuant hereto or thereto shall prove to have been false or incorrect in any material respect when made or deemed made; or

(d) Any Originator shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and such failure shall remain unremedied for 20 days after written notice thereof shall have been given by the Servicer to such Originator.

SECTION 8.2 Remedies.

(a) Optional Termination. Upon the occurrence of a Purchase and Sale Termination Event, the Company (but not the Servicer) shall have the option, by notice to the Originators (with a copy to the Administrator), to declare the Purchase Facility as terminated; provided, that the Company shall have satisfied all of its obligations under the Receivables Purchase Agreement and such agreement shall have been terminated in accordance with its terms.

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(b) Remedies Cumulative. Upon any termination of the Purchase Facility pursuant to Section 8.2(a), the Company shall have, in addition to all other rights and remedies under this Agreement, all other rights and remedies provided under the UCC of each applicable jurisdiction and other applicable laws, which rights shall be cumulative.

ARTICLE IX
INDEMNIFICATION

SECTION 9.1 Indemnities by the Originators. Without limiting any other rights which the Company may have hereunder or under applicable law, each Originator, severally and for itself alone hereby agrees to indemnify the Company and each of its officers, directors, employees and agents (each of the foregoing Persons being individually called a "Purchase and Sale Indemnified Party"), forthwith on demand, from and against any and all damages, losses, claims, judgments, liabilities and related costs and expenses, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively called "Purchase and Sale Indemnified Amounts") awarded against or incurred by any of them arising out of or as a result of the failure of such Originator to perform its obligations under this Agreement or any other Purchase Document, or arising out of the claims asserted against a Purchase and Sale Indemnified Party relating to the transactions contemplated herein or therein or the use of proceeds thereof or therefrom, INCLUDING PURCHASE AND SALE INDEMNIFIED AMOUNTS RESULTING FROM THE NEGLIGENCE OF THE PURCHASE AND SALE INDEMNIFIED PARTIES, but excluding, however, (i) Purchase and Sale Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Purchase and Sale Indemnified Party, (ii) any indemnification which has the effect of recourse for non-payment of the Purchased Receivables to any indemnitor (except as otherwise specifically provided under this Section 9.1) and (iii) any tax based upon or measured by net income, property or gross receipts. Without limiting the foregoing, each Originator, severally for itself alone, shall indemnify each Purchase and Sale Indemnified Party for Purchase and Sale Indemnified Amounts relating to or resulting from:

(a) the transfer by such Originator of an interest in any Purchased Receivable to any Person other than the Company;

(b) the breach of any representation or warranty made by such Originator (or any of its officers) under or in connection with this Agreement or any other Purchase Document, or any information or report delivered by Originator pursuant hereto or thereto, which shall have been false or incorrect in any material respect when made or deemed made;

(c) the failure by such Originator to comply with any applicable law, rule or regulation with respect to any Purchased Receivable generated by such Originator or the related Contract, or the nonconformity of any Purchased Receivable generated by such Originator or the related Contract with any such applicable law, rule or regulation;

21

(d) the failure to vest and maintain vested in the Company an ownership interest in the Purchased Receivables generated by such Originator free and clear of any Adverse Claim, other than an Adverse Claim arising solely as a result of an act of the Company or the Administrator, whether existing at the time of the purchase of such Purchased Receivables or at any time thereafter;

(e) the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Purchased Receivables or purported Purchased Receivables generated by such Originator, whether at the time of any purchase or at any subsequent time;

(f) any dispute, claim, offset or defense (other than discharge in bankruptcy) of the Obligor to the payment of any Purchased Receivable or purported Purchased Receivable generated by such Originator (including, without limitation, a defense based on such Purchased Receivable's or the related Contract's not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the services related to any such Purchased Receivable or the furnishing of or failure to furnish such services, and any claim for indemnification by the Buyer or any Affected Party under the Receivables Purchase Agreement arising out of any action or inaction by or the Receivables of such Originator, including without limitation under Sections 11.03 and 11.04 thereof;

(g) any product liability claim arising out of or in connection with services that are the subject of any Purchased Receivable generated by such Originator; and

(h) any tax or governmental fee or charge (other than any tax excluded pursuant to clause (iii) in the proviso to the preceding sentence), all interest and penalties thereon or with respect thereto, and all out-of-pocket costs and expenses, including the reasonable fees and expenses of counsel in defending against the same, which may arise by reason of the purchase or ownership of the Purchased Receivables generated by such Originator.

If for any reason the indemnification provided above in this Section 9.1 is unavailable to a Purchase and Sale Indemnified Party or is insufficient to hold such Purchase and Sale Indemnified Party harmless, then each of the Originators, severally and for itself, shall contribute to the amount paid or payable by such Purchase and Sale Indemnified Party to the maximum extent permitted under applicable law.

ARTICLE X
MISCELLANEOUS

SECTION 10.1 Amendments, etc.

(a) The provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and executed by the Company and each Originator (with the prior written consent of the Buyer, which consent shall not be unreasonably withheld).

22

(b) No failure or delay on the part of the Company, the Servicer, any Originator or any third party beneficiary in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Company, the Servicer or any Originator in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Company or the Servicer under this Agreement shall, except as may otherwise be stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval under this Agreement shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.

(c) The Purchase Documents contain a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter thereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter thereof, superseding all prior oral or written understandings.

SECTION 10.2 Notices, etc. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or by facsimile, to the intended party at the mailing address or facsimile number of such party set forth under its name on the signature pages hereof or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (i) if personally delivered, when received, (ii) if sent by certified mail three (3) Business Days after having been deposited in the mail, postage prepaid, and
(iii) if transmitted by facsimile, when sent, receipt confirmed by telephone or electronic means.

SECTION 10.3 No Waiver; Cumulative Remedies. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Without limiting the foregoing, each Originator hereby authorizes the Company, at any time and from time to time, to the fullest extent permitted by law, to set off, against any obligations of such Originator to the Company arising in connection with the Purchase Documents (including, without limitation, amounts payable pursuant to Section 9.1) that are then due and payable or that are not then due and payable but are accruing in respect of the then current Settlement Period, any and all indebtedness at any time owing by the Company to or for the credit or the account of such Originator.

SECTION 10.4 Binding Effect; Assignability. This Agreement shall be binding upon and inure to the benefit of the Company and each Originator and their respective successors and permitted assigns. Each of the Administrator and the Buyer is a third party beneficiary of all of the provisions of this Agreement, entitled to enforce such provisions directly against the parties hereto. No Originator may assign any of its rights hereunder or any interest herein without the prior written consent of the Company, except as otherwise herein specifically provided. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms,

23

and shall remain in full force and effect until such time as the parties hereto shall agree.

SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

SECTION 10.6 Costs, Expenses and Taxes. In addition to the obligations of the Originators under Article IX, each Originator, severally and for itself alone, agrees to pay on demand:

(a) to the Company (and any successor and permitted assigns thereof) all costs and expenses incurred by such Person in connection with the enforcement of this Agreement and the other Purchase Documents; and

(b) all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement or the other Purchase Documents to be delivered hereunder, and agrees to indemnify each Purchase and Sale Indemnified Party against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.

SECTION 10.7 SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY IRREVOCABLY (a) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK OR ANY FEDERAL COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY PURCHASE DOCUMENT; (b) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR UNITED STATES FEDERAL COURT; (c) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING; (d) IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN SECTION 10.2; AND (e) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION 10.7 SHALL AFFECT THE COMPANY'S RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING AGAINST ANY ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTIONS.

SECTION 10.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT, ANY OTHER PURCHASE DOCUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN

24

CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER PURCHASE DOCUMENT, AND AGREES THAT (a) ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND (b) ANY PARTY HERETO (OR ANY ASSIGNEE OR THIRD PARTY BENEFICIARY OF THIS AGREEMENT) MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.

SECTION 10.9 Captions and Cross References; Incorporation by Reference. The various captions (including, without limitation, the table of contents) in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. References in this Agreement to any underscored Section or Exhibit are to such
Section or Exhibit of this Agreement, as the case may be. The Exhibits hereto are hereby incorporated by reference into and made a part of this Agreement.

SECTION 10.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

SECTION 10.11 Acknowledgment and Agreement. By execution below, each Originator expressly acknowledges and agrees that all of the Company's rights, title, and interests in, to, and under this Agreement (but not its obligations), shall be assigned by the Company pursuant to the Receivables Purchase Agreement, and each Originator consents to such assignment. Each of the parties hereto acknowledges and agrees that the Administrator is a third party beneficiary of the rights of the Company arising hereunder and under the other Purchase Documents to which any Originator is a party.

SECTION 10.12 No Proceeding. Each Originator hereby agrees that it will not institute, or join any other Person in instituting, against the Company any insolvency proceeding so long as any of the Company Notes remains outstanding and for at least one year and one day following the later of (i) the day on which the aggregate outstanding principal amount of each Company Note is paid in full and (ii) the day on which all of the obligations of the Company under the Receivables Purchase Agreement are paid in full.

SECTION 10.13 Limited Recourse. Except as explicitly set forth herein, the obligations of the Company under this Agreement or any other Purchase Documents to which it is a party are solely the obligations of the Company. No recourse under any Purchase Document shall be had against, and no liability shall attach to, any officer, employee, director, or beneficiary, whether directly or indirectly, of the Company.

25

[SIGNATURE PAGES FOLLOW]

26

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.

CMC STEEL FABRICATORS, INC.
D/B/A/ SMI JOIST COMPANY,
as an Originator

By:
Stanley A. Rabin, Vice President

Address:    7800 Stemmons Freeway, 10th Floor
            Dallas, Texas 75247
Attention:  Louis A. Federle
Telephone:  214-689-4370
Facsimile:  214-689-4320

S-1

COMMERCIAL METALS COMPANY,
as an Originator

By:
Stanley A. Rabin, President

Address:    7800 Stemmons Freeway, 10th Floor
            Dallas, Texas 75247
Attention:  Louis A. Federle
Telephone:  214-689-4370
Facsimile:  214-689-4320

S-2

HOWELL METAL COMPANY,
as an Originator

By:
Stanley A. Rabin, Vice President

Address:    7800 Stemmons Freeway, 10th Floor
            Dallas, Texas 75247
Attention:  Louis A. Federle
Telephone:  214-689-4370
Facsimile:  214-689-4320

S-3

OWEN ELECTRIC STEEL COMPANY
OF SOUTH CAROLINA D/B/A
SMI STEEL SOUTH CAROLINA,
as an Originator

By:
Stanley A. Rabin, Vice President

Address:    7800 Stemmons Freeway, 10th Floor
            Dallas, Texas 75247
Attention:  Louis A. Federle
Telephone:  214-689-4370
Facsimile:  214-689-4320

S-4

SMI STEEL INC.,
as an Originator

By:
Stanley A. Rabin, Vice President

Address:    7800 Stemmons Freeway, 10th Floor
            Dallas, Texas 75247
Attention:  Louis A. Federle
Telephone:  214-689-4370
Facsimile:  214-689-4320

S-5

STRUCTURAL METALS, INC.,
as an Originator

By:
Stanley A. Rabin, Vice President

Address:    7800 Stemmons Freeway, 10th Floor
            Dallas, Texas 75247
Attention:  Louis A. Federle
Telephone:  214-689-4370
Facsimile:  214-689-4320

S-6

CMC RECEIVABLES, INC.

By:
Stanley A. Rabin, Vice President

Address:    7800 Stemmons Freeway, 10th Floor
            Dallas, Texas 75247
Attention:  Louis A. Federle
Telephone:  214-689-4370
Facsimile:  214-689-4320

S-7

EXHIBIT 10(i)(c)

AMENDMENT TO PURCHASE AND SALE AGREEMENT

AMENDMENT TO PURCHASE AND SALE AGREEMENT dated as of April 22, 2004
(the "Amendment") among CMC Receivables, Inc. (the "Company"), CMC Steel Fabricators, Inc. d/b/a SMI Joist Company ("CMC Steel"), Commercial Metals Company ("Commercial Metals"), Howell Metal Company ("Howell"), Owen Electric Steel Company of South Carolina d/b/a SMI Steel South Carolina ("Owen"), SMI Steel Inc. ("SMI"), Structural Metals, Inc. ("Structural" and together with CMC Steel, Commercial Metals, Howell, Owen and SMI, the "Originators").

W I T N E S S E T H:

WHEREAS, the Company and the Originators are parties to a Purchase and Sale Agreement dated as of June 20, 2001 (the "PSA");

WHEREAS, the Company, Commercial Metals Company and Three Rivers Funding Corporation ("TRFCO") are parties to a Receivables Purchase Agreement dated as of June 20, 2001 (the "RPA");

WHEREAS, the Company, Commercial Metals Company, TRFCO, Liberty Street Funding Corp. ("Liberty"), The Bank of Nova Scotia ("Scotia") and Mellon Bank, N.A. ("Mellon"), as managing agent and administrative agent, are parties to an Amended and Restated Receivables Purchase Agreement dated as of April 22, 2004;

WHEREAS, the parties hereto desire to amend the PSA;

NOW, THEREFORE, the parties agree as follows:

SECTION 1. DEFINITIONS

Defined terms used herein and not defined herein shall have the meanings assigned to such terms in the PSA.

SECTION 2. AMENDMENT OF PSA

As of the date hereof, the RPA has been amended and restated to add Liberty Street Funding Corp. ("Liberty") as an additional Buyer under the RPA and to add each of The Bank of Nova Scotia ("Scotia") and Mellon Bank, N.A. ("Mellon") as parties to the RPA in their capacities as Managing Agents under the RPA and to add Mellon in its capacity as Administrative Agent under the RPA. Accordingly, the PSA is hereby amended such that all references to the Buyer in the PSA are deemed to also refer to Liberty in addition to TRFCO, and each of Liberty, Scotia and Mellon are added as third party beneficiaries of all of the rights of the


Company arising under the PSA and the other Purchase Documents to which any Originator is a party, entitled to enforce the provisions of the PSA directly against the parties to the PSA.

SECTION 3. CONDITIONS PRECEDENT

The occurrence of the effective date shall be subject to the conditions precedent that this Amendment shall have been executed by each party hereto.

SECTION 4. GOVERNING LAW

THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

SECTION 5. EXECUTION IN COUNTERPARTS

This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Amendment. Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 6. CONFIRMATION OF AGREEMENT

Each of the parties to the PSA agree that, except as amended hereby, the PSA continues in full force and effect.

2

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their authorized officers as of the day and year first above written.

CMC RECEIVABLES, INC.

By: /s/ Stanley A. Rabin
   Authorized Signatory

CMC STEEL FABRICATORS, INC., D/B/A/
SMI JOIST COMPANY

By: /s/ Stanley A. Rabin
   Authorized Signatory

COMMERCIAL METALS COMPANY

By: /s/ Stanley A. Rabin
   Authorized Signatory

HOWELL METAL COMPANY

By: /s/ Stanley A. Rabin
   Authorized Signatory

OWEN ELECTRIC STEEL COMPANY OF SOUTH
CAROLINA D/B/A SMI STEEL SOUTH CAROLINA

By: /s/ Stanley A. Rabin
   Authorized Signatory

SMI STEEL INC.

By: /s/ Stanley A. Rabin
  Authorized Signatory

STRUCTURAL METALS, INC.

By: /s/ Stanley A. Rabin
  Authorized Signatory

3

EXHIBIT 10(iii)(d)

COMMERCIAL METALS COMPANY KEY EMPLOYEE
LONG-TERM PERFORMANCE PLAN

PURPOSE
The objectives for the Long-Term Performance Plan are to:

o Link compensation to the long-term financial success and performance of the Company, focusing on factors which help drive shareholder value creation;

o Provide a greater long-term orientation and competitiveness to total compensation for executives, by establishing a performance-based component in addition to the existing stock-option plan;

o By focusing on long-term performance and success, provide a balance to the short-term focus of the Annual Incentive Plan in the decision-making process of management;

o Encourage senior management to promote the interests of the Company as a whole by linking compensation to longer-term, company-wide results;

o Enable the Company to meet competitive total compensation needs in attracting and retaining superior executive talent; and

o Fund payouts from the plan through improved business results.

STRUCTURE
The Long-Term Performance Plan is a cash plan, with awards that are contingent on the attainment of multi-year performance goals. At the beginning of the performance period, goals are established which are designed to measure the degree of business success over the timeframe. The compensation committee reviews and approves goals that are recommended by management. At the end of the period, performance against the goals is assessed and payouts are determined.

Business results for the Company will be measured over a three-year period. Grants for the plan will be made annually, with new overlapping award cycles beginning each year. To phase in the plan, three performance cycles will begin on September 1, 2001: a one-year cycle, a two-year cycle, and a "normal" three-year cycle. Thereafter, a new three-year performance cycle will begin each year.

ELIGIBILITY
Participation in the plan is limited to key executives and employees of the Company and its subsidiaries, who impact organization-wide results. Participants in the plan will be nominated by management and approved by the compensation committee. All executive officers of the Company participate in the plan.

TARGET AWARD OPPORTUNITIES
Target award opportunities will be established for each participant at the beginning of the performance period. The target award will be calculated as a percentage of base salary. The target


award represents the payout the participant may receive if targeted performance has been achieved at the end of the performance period.

In addition, threshold and maximum award levels will be established as a percent of target, defining payout parameters for performance that exceeds or falls below targeted levels.

Awards for the one- and two-year phase-in cycles will be 1/3 and 2/3 of these "normal" target levels respectively.

PERFORMANCE MEASUREMENT
At the beginning of each performance cycle, senior management will establish and communicate the specific range of performance objectives for the Company. The goals will be reviewed and the key performance factors approved by the compensation committee.

At the end of the performance cycle, actual relative performance against these goals will be measured, and the resulting awards will be calculated and paid subject to review and approval by the compensation committee.

PERFORMANCE MEASURES
Growth in earnings before interest, taxes, depreciation, and amortization (EBITDA) over the performance period will be the specific performance measure used in the plan. Target performance achievement levels will be established using the Company's actual historical EBITDA performance as a baseline. EBITDA growth is measured against the highest EBITDA dollar amount prior to the three-year measurement period. Therefore awards are earned only if previous records are exceeded by threshold amounts.

PERFORMANCE WEIGHTINGS
Corporate performance will determine 100 percent of the award for all plan participants.


EXHIBIT 10(iii)(e)

COMMERCIAL METALS COMPANY KEY EMPLOYEE
ANNUAL INCENTIVE PLAN

PURPOSE
The objectives for the Annual Incentive Plan are to:

o Pay for short-term results which help drive longer term shareholder value creation for Commercial Metals Company including achieving annual business and financial performance targets;

o Encourage senior management to promote the interests of the Company and subsidiaries by linking compensation to the Company's consolidated financial results;

o Maintain an entrepreneurial culture among key management employees by linking compensation to results for their business unit or area of responsibility;

o Communicate expectations, results, and incentive payouts in a clear, unambiguous way;

o Provide total cash compensation levels that are competitive with or above the market, especially with high performance; and

o Fund the incentive payouts from results achieved consistent with acceptable returns for shareholders.

PARTICIPANTS
Those executive officers of the Company and selected other senior managers as approved by the compensation committee.

AWARD OPPORTUNITIES
Each eligible plan participant has a target award opportunity, expressed as a percentage of base salary. The target award represents the level of bonus payment the participant may earn in the event financial performance is achieved at targeted levels and acceptable organizational standards are met.

In addition, a threshold and superior award level will be established bounding payouts for performance levels that exceed or fall below the target level. Total bonus awards by segment for all eligible employees (including those bonuses paid to participants in the annual incentive plan) are subject to a 20% ceiling limitation of operating profit.


PERFORMANCE MEASUREMENT
At the beginning of each fiscal year, senior management will establish and communicate the specific range of performance objectives for the Company and business units/individuals. The objective will reflect the key strategic goals of the Company and will be aligned and supportive of higher level plans, and be realistic and attainable stretch goals. The goals will be reviewed and the key performance factors approved by the compensation committee; the review process will consider the goals in light of the external environment and shareholder return and are subject to modification by the committee.

At the end of the fiscal year, actual relative performance against these goals will be measured, and the resulting incentive amounts will be calculated. The compensation committee will approve final awards and may consider factors other than financial performance and unforeseen issues.

PERFORMANCE MEASURE
The primary performance measure of the Annual Incentive Plan is operating profit defined as FIFO operating profit before taxes but after interest expense (income).

WEIGHTING OF CORPORATE, BUSINESS UNIT, AND INDIVIDUAL PERFORMANCE
Based on a participant's function and position level, the award opportunity is proportionally weighted by the results of Commercial Metals Company's consolidated performance and its underlying segments. For instance, the CEO's award performance is based entirely on the consolidated performance of the Company. The President of the Marketing and Trading division's award performance is based 70% on the Marketing and Trading segment performance and 30% on consolidated performance.


EXHIBIT 10(iii)(g)

EMPLOYMENT CONTRACT

THIS CONTRACT is made and entered into on this 2nd day of January, 1998, by and between

COMMERCIAL METALS (INTERNATIONAL) AG, at Baarerstrasse 14, 6301 Zug, Switzerland (hereinafter styled “Company”)

and Dr. Hanns Zöllner, Zimmelstr. 68, 6314 Unterägeri, Switzerland (hereinafter styled “Employee”)

WITNESSETH

WHEREAS, the Company is duly incorporated and existing under the laws of Switzerland;

WHEREAS, the Company desires to retain the services of the Employee;

WHEREAS, the Employee desires to perform services for the Company;

and

WHEREAS, the Company has determined what a reasonable compensation will be for the Employee and has offered to the Employee continuing employment in consideration of such compensation and other benefits of employment, and the Employee is willing to accept continuing employment under the terms hereof;

NOW, THEREFORE, for and in consideration of the mutual covenants and promises herein contained, the parties agree as follows:

1.   Employment
 
    The Company hereby continues to employ the Employee and the Employee hereby accepts continued employment from the Company under the terms and conditions herein specified.
 
2.   Term
 
    The term of this employment agreement will continue for 96 months from 2nd January, 1998, thereafter and after expiration of the 96 months’ period for an unspecified period of time unless either party gives notice to the other party to terminate the employment in accordance with the conditions of the “Schweizerischen Obligationenrecht”.

Page 1


 

2a.   Termination Clause
 
    In the event that the Company wishes to terminate the employment of the employee prior to the expiration of the first 96 months and for
  other reasons than stipulated in Clause 9, the Company shall pay to the employee a severance payment as follows:

  (i)   Up until 31 December, 2000, two years (24 months) salary based on the salary at time of termination.
 
  (ii)   From 1 January, 2001 - 31 December, 2005, one year (12 months) salary based on the salary at time of termination.

    This Termination Clause is not valid should the company wish the employee to relocate to a Western country location where CMC has an office such as Dallas, New York, London, Sydney or similar cities and the employee without good reason chooses not to relocate.
 
3.   Compensation
 
    For all services rendered by the Employee under this contract, the Company shall pay to the Employee SFr. 380,000 per year in 12 equal monthly installments. The said salary may be increased, but not decreased, as the Company may from time to time determine. In addition, the Employee may be paid cash bonuses in such amount and at such times and on such basis as the Company may from time to time, at its sole and absolute discretion, determine.
 
3a.   Special Discretionary Bonus
 
    The Company will review the performance of the employee in July each year and will recommend a Special Discretionary Bonus to be paid to the employee for performance based on the employee’s contribution to Commercial Metals Company (the Corporation).
 
    The Corporation at its sole discretion will approve the Special Discretionary Bonus in October of each year.
 
4.   Other Benefits
 
    The Employee will continue to participate in the Pension Fund, and Death and Disability Insurance as per the “Reglement der Personalfürsorgestiftung der Commercial Metals Company, Zug”.
 
    In addition, the Employee is covered by the Company’s Group Accident Insurance. The Company pays all insurance premiums of the Group Accident Insurance.

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5.   Duties
 
    The Employee is employed to exclusively perform services for the Company in the Capacity as a Member of the management as further specified in a job description. The Company shall have the power to determine not only what specific duties shall be performed by the Employee, but also the means and manner by which those duties shall be performed by the Employee. Additionally, the Company shall have the power to determine when such services shall be performed as well as to determine the days and hours during which the Employee shall perform his duties; provided, however, that the Employee shall not be compelled to work longer than a normal working week. The Employee will be entitled to 20 working days paid holidays per year which should be taken in agreement with the requirements of the Company.
 
6.   Title
 
    The Employee will have the titles of Managing Director of Commercial Metals (International) AG, and Managing Director of CMC Trading AG, and will report directly to the President – International Division of Commercial Metals Company.
 
7.   Exclusive Service
 
    The Employee shall devote his full time and attention to the performance of his services to and for the Company. He shall carry out such duties in a manner that best serves the interests of the Company – a determination which is to be made by the Company at its sole and absolute discretion – and faithful compliance with all policies, standards, regulations and rules of the Company now or hereafter promulgated.
 
8.   Non Compete Covenant
 
    As Executive Officer the Employee will be privy to the names of customers and to trade secrets. The use of this knowledge after termination of the employment could cause substantial damages to the Company.
 
    The Employee hereby undertakes that after the termination of the employment by the Employee, he will not within two years after termination solely or jointly with any other person whether as principal, agent, director, executive officer, employee, shareholder, partner, joint venture, member, adviser, consultant or otherwise howsoever directly or indirectly be engaged, involved in the Canton of Zug, Zurich, Baselland, Baselstadt, Luzern, Genf, Tessin, Waadt, where the main competitors of the Company are domiciled, be associated with any trade or business trading in iron, steel, steel semi-finished products and/or steel finished products and aluminium and aluminium semi-finished products and be engaged in project financing and financial services in competition with the Company or any of its related corporations.
 
    The Employer can demand restitution of damages caused and can demand the termination of the infringements of this Non Compete Covenant.

Page 3


 

9.   Involuntary Termination
 
      This contract shall be deemed to be terminated and the employment relationship between the Employee and the Company shall be deemed
  to be terminated upon occurrence of any of the following:

  A)   Upon the death of the Employee, during employment, as laid down in the “Schweizerischem Obligationenrecht”.
 
  B)   The Employee refuses to faithfully and diligently perform the usual customary duties of his employment and to adhere to provisions of this contract.
 
  C)   The Employee fails or refuses to comply with the reasonable policies, standards, regulations and rules of the Company, which from time to time may be established.
 
  D)   The Employee conducts himself in an unethical, immoral or fraudulent manner, or in a manner that is contrary to the Policy of Business Conduct of the Commercial Metals Company and its subsidiaries; or is found guilty of unethical conduct by any board, institution or organisation having any privilege, right or jurisdiction to pass judgement upon the conduct of the Employee; or the Employee’s conduct discredits the Company or is detrimental to the reputation, character and standing of the Company.
 
  E)   The Company or the Employee terminates the employment for reasons as stipulated in Article 337 of the “Schweizerischem Obligationenrecht”.

10.   Relationship of the Parties
 
    The parties recognize that the Company shall be responsible for the management of its business affairs, and that the relationship between the Company and the Employee shall be that of an employer and an employee. All fees, compensation and other things of value, charged by the Company and received or realized as a result of the rendering of services by the Employee shall belong to and be paid and delivered forthwith to the Company by the Employee.
 
11.   All other conditions of this employment are subject to the conditions of the “Schweizerischem Obligationenrecht”.

IN WITNESS WHEREOF, the parties hereto have set their hands on the day, month and year first above written.

         
 
  COMMERCIAL METALS (INTERNATIONAL) AG
 
       
/s/ DR. HANNS ZÖLLNER
  /s/ MURRAY MCCLEAN    

 
 
 
   
Dr. Hanns Zöllner
  Murray McClean,
CHAIRMAN
   

Page 4

EXHIBIT 10(iii)(q)
STOCK APPRECIATION RIGHTS AGREEMENT
COMMERCIAL METALS COMPANY
1999 NON-EMPLOYEE DIRECTOR STOCK PLAN
     1.  Grant of Stock Appreciation Rights . Pursuant to the Commercial Metals Company 1999 Non-Employee Director Stock Plan (the “ Plan ”) Commercial Metals Company, a Delaware corporation (the “ Company ”), hereby grants to
                                                               
(the “ Participant ”)
Stock Appreciation Rights relating to the appreciation in             shares of Common Stock of the Company (the “ Stock Appreciation Rights ” or “ SARs ”) at an exercise price (the “ SAR Price ”) of $             per share (which is equal to or greater than the Closing Price of a share of Common Stock as of the Date of Grant), all upon and subject to the terms and conditions set forth in this Agreement. This SAR Agreement is intended to comply with the provisions governing stock appreciation rights under Section 409A of the Code and the guidance issued thereunder, in order to exempt the SARs from application of Section 409A of the Code.
     2.  Date of Grant . The Date of Grant of the Stock Appreciation Rights is                      , 2009.
     3.  Subject to Plan . The SARs and this Agreement are subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the extent not otherwise inconsistent with the provisions of this Agreement. Except as otherwise provided herein, the capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan. The SARs are subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing.
     4.  Vesting; Time of Exercise . The Participant shall become vested in installments of shares of Stock Appreciation Rights awarded to the Participant and such shares shall become fully exercisable in accordance with the following schedule:
     a. Fifty percent (50%), rounded down to the nearest full SAR share, shall vest and become exercisable on the first anniversary of the Date of Grant, provided the Participant is a Director of the Company on that date.
     b. Fifty percent (50%), rounded down to the nearest full SAR share shall vest and become exercisable on the second anniversary of the Date of Grant, provided the Participant is a director of the Company on that date.
     Notwithstanding the foregoing, the vesting of shares under this SAR Agreement shall automatically accelerate and the Stock Appreciation Rights shall be exercisable in full upon (i) the Participant’s death; (ii) the Participant’s Termination of Service as a Director as a result of his Total and Permanent Disability; (iii) the Participant’s Termination of Service as a Director as a result of his Retirement; or (iv) the occurrence of a Change in Control.

 


 

     5.  Term; Forfeiture . Except as otherwise provided in this Agreement, unexercised SARs that are unvested shall terminate on the date of the Participant’s Termination of Service. Unexercised SARs that are vested shall terminate on the first to occur of the following:
     a. 5 p.m. on                      , 2016 (the period of time extending from the date of this Agreement to such date being referred to herein as the “ SARs Period ”);
     b. 5 p.m. on the date that is twenty four (24) months following the Participant’s Termination of Service due to Retirement;
     c. 5 p.m. on the date that is twelve (12) months following the Participant’s Termination of Service due to death or Total and Permanent Disability; or
     d. 5 p.m. on the date of the Participant’s Termination of Service for any reason not otherwise specified in this Section 5 .
     6.  Exercise and Payment . The Participant may exercise vested SARs at any time prior to the termination of the SARs in accordance with Section 5 above by the delivery of written notice to the Committee setting forth the number of vested shares of Stock Appreciation Rights which are to be exercised and the date of exercise thereof (the “ Exercise Date ”) which shall be a date not less than three (3) business days after giving such notice, unless an earlier date and time shall have been mutually agreed upon. On the Exercise Date, the Company shall deliver to the Participant the number of shares of Common Stock having an aggregate Fair Market Value, as of the Exercise Date equal to the excess (if any) of (i) the Fair Market Value as of the Exercise Date of a share of Common Stock over (ii) the SAR Price of a share specified in this Agreement, multiplied by the total number of shares of SARs being exercised.
     7.  No Fractional Shares . SARs may be exercised only with respect to full shares, and no fractional share of stock shall be issued.
     8.  Who May Exercise . Subject to the terms and conditions set forth in Sections 4 and 5 above, during the lifetime of the Participant, SARs may only be exercised by the Participant or his guardian or legal representative. If the Participant dies prior to the dates specified in Section 5 above without having exercised all of his or her then-vested SARs as of his or her date of death, then the following persons may exercise the exercisable portion of the SARs on behalf of the Participant at any time prior to the earliest of the dates specified in Section 5 hereof: the personal representative of his or her estate or any person who acquired the right to exercise the SARs by bequest or inheritance or by reason of the death of the Participant; provided that the SARs shall remain subject to the other terms of this Agreement, the Plan and all applicable laws, rules, and regulations.
     9.  Non-Assignability . The Stock Appreciation Rights granted under this Agreement, and any interest in or right associated with such Stock Appreciation Rights, are not assignable or transferable by the Participant except by will or by the laws of descent and distribution.
     10.  Spouse Bound . The spouse of the Participant individually is bound by, and such spouse’s interest, if any, in any Awarded Shares is subject to, the terms of this Agreement.
     11.  Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.

2


 

     12.  No Rights as Shareholder . The Participant will have no rights as a shareholder of the Company with respect to any shares of Stock Appreciation Rights.
     13.  Adjustment of Number of Shares and Related Matters . The number of shares of Common Stock covered by the SARs, and the SAR Price thereof, shall be subject to adjustment in accordance with Articles 11-13 of the Plan and Section 21 below.
     14.  Participant’s Acknowledgments . The Participant acknowledges that a copy of the Plan has been made available for his review by the Company, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the SARs subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.
     15.  Law Governing . This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Texas (excluding any conflict of laws rule or principle of Texas law that might refer the governance, construction, or interpretation of this agreement to the laws of another state).
     16.  No Right to Continue Service or Employment . Nothing herein shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary or interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an Employee at any time.
     17.  Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a Court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.
     18.  Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that is set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.
     19.  Entire Agreement . This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.
     20.  Parties Bound . The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein.

3


 

     21.  Modification . No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties; provided, however, that the Company may change or modify the terms of this Agreement, including, without limitation, the SAR Price, without the Participant’s consent or signature if the Company determines, in its sole discretion, that such change or modification is necessary for purposes of compliance with or exemption from the requirements of Section 409A of the Code or any regulations or other guidance issued thereunder. Notwithstanding the preceding sentence, the Company may amend the Plan or revoke the SARs to the extent permitted by the Plan.
     22.  Headings . The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.
     23.  Gender and Number . Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.
     24.  Notice . Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:
     a. Notice to the Company shall be addressed and delivered as follows:
Commercial Metals Company
6565 N. MacArthur, Suite 800
Irving, Texas 75039
Attention: Secretary
Facsimile: (214) 689-4326
     b. Notice to the Participant shall be addressed and delivered as set forth on the signature page.
     25.  Tax Requirements . The Participant is hereby advised to consult immediately with his or her own tax advisor regarding the tax consequences of this Agreement, including without limitation, any possible tax consequences of this Agreement in connection with Section 409A of the Code. The Company or, if applicable, any Subsidiary (for purposes of this Section 25 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to this Award. Such payments shall be required to be made when requested by the Company and shall be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made in cash, by check, or, to the extent permitted by the Committee, through the delivery of shares of Common Stock owned by the Participant (which may be effected by the actual delivery of shares of Common Stock by the Participant or, with the Committee’s approval, by the Company’s withholding a number of shares to be issued upon the exercise of a SAR, if applicable), which shares have an aggregate Fair Market Value equal to the required minimum withholding payment, or any combination thereof.

4


 

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his or her consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.
         
  COMPANY:

COMMERCIAL METALS COMPANY


Murray R. McClean
President & Chief Executive Officer

PARTICIPANT:
 
 
     
  Signature   
  Name (print):     
  Address:     
       
       
 

5

Exhibit 12
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands, except ratios)
                                         
    2009     2008     2007     2006     2005  
EARNINGS:*
                                       
EARNINGS BEFORE INCOME TAXES
  $ 33,925     $ 337,311     $ 536,056     $ 554,493     $ 443,033  
INTEREST EXPENSE
    77,562       59,488       37,257       29,569       31,187  
INTEREST IMPUTED ON RENT
    22,780       21,217       12,082       8,293       6,258  
AMORTIZATION OF CAPITALIZED INTEREST
    899       728       655       1,224       1,224  
 
                             
 
                                       
TOTAL EARNINGS
    135,166       418,744       586,050       593,579       481,702  
FIXED CHARGES:*
                                       
INTEREST EXPENSE
    77,562       59,488       37,257       29,569       31,187  
INTEREST CAPITALIZED
    12,638       6,877       3,198       2,256       1,302  
INTEREST IMPUTED ON RENT
    22,780       21,217       12,082       8,293       6,258  
 
                             
 
                                       
TOTAL FIXED CHARGES
    112,980       87,582       52,537       40,118       38,747  
RATIO OF EARNINGS TO FIXED CHARGES
    1.20       4.78       11.16       14.80       12.43  
 
*   Earnings and fixed charges include a division classified as discontinued operations.

Exhibit 21
SUBSIDIARIES OF THE COMPANY
             
    JURISDICTION OF   PERCENTAGE
NAME OF SUBSIDIARY   INCORPORATION   OWNED
AHT, Inc.
  Pennsylvania     100  
CMC Centrozlom-Katowice Sp.z o.o.
  Poland     100  
Centrum Zawiercie Sp.z o.o.
  Poland     52  
CMC Australia Pty., Limited
  Australia     100  
CMC (Beijing) International Trade Company Ltd.
  China     100  
CMC China Guangzhou International Trade Co., Ltd.
  China     100  
CMC Commercial Metals de Mexico S de RL de CV
  Mexico     100  
CMC Europe AG
  Switzerland     100  
CMC Fareast Limited
  Hong Kong     100  
CMC International AG
  Switzerland     100  
CMC International S.E. Asia Pte., Limited
  Singapore     100  
CMC Oil Company
  Texas     100  
CMC Poland S.A.
  Poland     100  
CMC Putex Sp.z o.o.
  Poland     100  
CMC Receivables, Inc.
  Delaware     100  
CMC Recycling Singapore
  Singapore     100  
CMC Service Sp.z o.o.
  Poland     99  
CMC Sisak d.o.o.
  Croatia     100  
CMC Steel Holding Company
  Delaware     100  
CMC Steel Fabricators, Inc.
  Texas     100  
CMC UK Limited
  England     100  
CMC Zawiercie SA
  Poland     99  
Coil Steels Group Pty Limited
  Australia     100  
Coil Steels Properties Pty Limited
  Australia     100  
Cometals China, Inc.
  Texas     100  
Cometals Far East, Inc.
  Texas     100  
Cometals Tianjin International Trade Co., Limited
  China     100  
Commercial Metals Deutschland GmbH
  Germany     100  
Commercial Metals International AG
  Switzerland     100  
Commercial Metals SF/JV Company
  Texas     100  
Commonwealth Metal China Inc.
  Texas     100  
Howell Metal Company
  Virginia     100  
Lofland Company Dallas
  Texas     100  
Lofland Company Midwest
  Delaware     100  
The Lofland Company of Texas
  Texas     100  
Lofland Fabricators, Inc.
  Delaware     100  
Owen Electric Steel Company of South Carolina
  South Carolina     100  
Owen Industrial Products, Inc.
  South Carolina     100  
Scrapena S.A.
  Poland     51  
Scrap-Service Sp.z o.o.
  Poland     51  
SMI-Owen Steel Company, Inc.
  South Carolina     100  
SMI Steel Inc.
  Alabama     100  
Southmet PTY, Limited
  Australia     100  
Steel Products de Mexico, S.A. de C.V.
  Mexico     100  
Structural Metals, Inc.
  Texas     100  
CMC Cometals Processing, Inc.
  Texas     100  

 

Exhibit 23
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-144500 on Form S-3 and Registration Statement No. 333-141663, No. 333-141662, No. 333-90726, No. 333-90724, No. 033-61073, No. 033-61075, No. 333-27967 and No. 333-42648 on Form S-8 of our reports dated October 30, 2009, relating to the consolidated financial statements and financial statement schedule of Commercial Metals Company and subsidiaries and the effectiveness of Commercial Metals Company and subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Commercial Metals Company for the year ended August 31, 2009.
/s/ Deloitte & Touche LLP
Dallas, Texas
October 30, 2009

 

EXHIBIT 31(a)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Murray R. McClean, certify that:
1. I have reviewed this report on Form 10-K of Commercial Metals Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 30, 2009
     
 
/s/ Murray R. McClean
 
Murray R. McClean
   
Chairman of the Board, President and Chief Executive Officer
   

 

EXHIBIT 31(b)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, William B. Larson, certify that:
1. I have reviewed this report on Form 10-K of Commercial Metals Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
     
Date: October 30, 2009
   
 
   
 
   
/s/ William B. Larson
 
William B. Larson
Senior Vice President and Chief Financial Officer
   

 

EXHIBIT 32(a)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Commercial Metals Company (the “Company”) on Form 10-K for the period ended August 31, 2009 (the “Report”), I, Murray R. McClean, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
     
 
/s/ Murray R. McClean
 
Murray R. McClean
   
Chairman of the Board President and Chief Executive Officer
   
Date: October 30, 2009
The foregoing certification is being furnished as an exhibit to the Form 10-K pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-K for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

EXHIBIT 32(b)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Commercial Metals Company (the “Company”) on Form 10-K for the period ended August 31, 2009 (the “Report”), I, William B. Larson, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
     
 
/s/ William B. Larson
 
William B. Larson
   
Senior Vice President and Chief Financial Officer
   
Date: October 30, 2009
The foregoing certification is being furnished as an exhibit to the Form 10-K pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-K for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.