COMMERCIAL METALS CO (Form: 10-Q, Received: 04/08/2011 16:42:40)

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended February 28, 2011

Commission File Number 1-4304

COMMERCIAL METALS COMPANY

(Exact name of registrant as specified in its charter)


Delaware		75-0725338

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

6565 N. MacArthur Blvd.

Irving, Texas 75039

(Address of principal executive offices)(Zip Code)

(214) 689-4300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

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

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

As of April 4, 2011 there were 115,435,301 shares of the Company’s common stock issued and outstanding excluding 13,625,363 shares held in the Company’s treasury.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

TABLE OF CONTENTS


	PAGE NO.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) — February 28, 2011 and August 31, 2010		3
Consolidated Statements of Operations (Unaudited) — Three months and six months ended February 28, 2011 and 2010		4
Consolidated Statements of Cash Flows (Unaudited) — Six months ended February 28, 2011 and 2010		5
Consolidated Statements of Stockholders’ Equity (Unaudited) — Six months ended February 28, 2011 and 2010		6
Notes to Consolidated Financial Statements (Unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29
PART II — OTHER INFORMATION
Items 1 — 6		29
Signatures		31
Index to Exhibits
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART 1. FINANCIAL INFORMATION


ITEM 1.		FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	February 28,			August 31,
(in thousands, except share data)	2011			2010
Assets
Current assets:
Cash and cash equivalents	$	265,021		$	399,313
Accounts receivable (less allowance for collection losses of $29,041 and $29,721)		849,363			824,339
Inventories		826,539			674,680
Other		230,954			276,874

Total current assets		2,171,877			2,175,206
Property, plant and equipment:
Land		93,596			94,426
Buildings and improvements		555,566			540,285
Equipment		1,685,632			1,649,723
Construction in process		33,363			56,124

		2,368,157			2,340,558
Less accumulated depreciation and amortization		(1,164,010	)		(1,108,290	)

		1,204,147			1,232,268
Goodwill		72,296			71,580
Other assets		174,011			227,099

Total assets	$	3,622,331		$	3,706,153


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable-trade	$	539,519		$	504,388
Accounts payable-documentary letters of credit		106,609			226,633
Accrued expenses and other payables		341,404			324,897
Notes payable		7,110			6,453
Commercial paper		10,000			10,000
Current maturities of long-term debt		36,569			30,588

Total current liabilities		1,041,211			1,102,959
Deferred income taxes		43,648			43,668
Other long-term liabilities		120,162			108,870
Long-term debt		1,159,523			1,197,282

Total liabilities		2,364,544			2,452,779
Commitments and contingencies
CMC stockholders’ equity:
Preferred stock		—			—
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 115,408,109 and 114,325,349 shares		1,290			1,290
Additional paid-in capital		368,574			373,308
Accumulated other comprehensive income (loss)		50,038			(12,526	)
Retained earnings		1,105,401			1,178,372
Treasury stock 13,652,555 and 14,735,315 shares at cost		(268,210	)		(289,708	)

Stockholders’ equity attributable to CMC		1,257,093			1,250,736
Stockholders’ equity attributable to noncontrolling interests		694			2,638

Total equity		1,257,787			1,253,374

Total liabilities and stockholders’ equity	$	3,622,331		$	3,706,153

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands, except share data)	2011			2010			2011			2010
Net sales	$	1,791,766		$	1,322,443		$	3,574,246		$	2,724,701
Costs and expenses:
Cost of goods sold		1,710,580			1,313,829			3,344,072			2,608,324
Selling, general and administrative expenses		121,575			147,488			245,175			280,673
Interest expense		18,278			20,236			36,603			39,687

		1,850,433			1,481,553			3,625,850			2,928,684

Loss from continuing operations before income taxes		(58,667	)		(159,110	)		(51,604	)		(203,983	)
Income tax benefit		(12,535	)		(23,858	)		(5,805	)		(40,053	)

Loss from continuing operations		(46,132	)		(135,252	)		(45,799	)		(163,930	)

Earnings (loss) from discontinued operations before taxes		(21	)		(62,356	)		647			(66,514	)
Income taxes (benefit)		(8	)		(24,227	)		251			(25,840	)

Earnings (loss) from discontinued operations		(13	)		(38,129	)		396			(40,674	)


Net loss	$	(46,145	)	$	(173,381	)	$	(45,403	)	$	(204,604	)
Less net earnings (loss) attributable to noncontrolling interests		17			(91	)		108			(85	)

Net loss attributable to CMC	$	(46,162	)	$	(173,290	)	$	(45,511	)	$	(204,519	)


Basic earnings (loss) per share attributable to CMC:
Loss from continuing operations	$	(0.40	)	$	(1.19	)	$	(0.40	)	$	(1.45	)
Loss from discontinued operations		—			(0.34	)		—			(0.36	)

Net loss	$	(0.40	)	$	(1.53	)	$	(0.40	)	$	(1.81	)
Diluted earnings (loss) per share attributable to CMC:
Loss from continuing operations	$	(0.40	)	$	(1.19	)	$	(0.40	)	$	(1.45	)
Loss from discontinued operations		—			(0.34	)		—			(0.36	)

Net loss	$	(0.40	)	$	(1.53	)	$	(0.40	)	$	(1.81	)
Cash dividends per share	$	0.12		$	0.12		$	0.24		$	0.24

Average basic and diluted shares outstanding		114,736,984			113,275,457			114,528,001			112,885,377

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended
	February 28,
(in thousands)	2011			2010
Cash flows from (used by) operating activities:
Net loss	$	(45,403	)	$	(204,604	)
Adjustments to reconcile net loss to cash from (used by) operating activities:
Depreciation and amortization		81,631			88,376
Provision for losses on receivables, net		197			916
Share-based compensation		6,026			5,575
Deferred income taxes		(727	)		11,783
Tax benefits from stock plans		(2,302	)		(2,607	)
(Gain) loss on sale of assets and other		(1,498	)		27
Write-down of inventory		5,224			36,493
Asset impairment		—			32,371
Changes in operating assets and liabilities, net of acquisitions:
Decrease (increase) in accounts receivable		(41,780	)		67,483
Accounts receivable sold (repurchased), net		35,088			(13,542	)
Increase in inventories		(129,245	)		(19,178	)
Decrease (increase) in other assets		40,742			(58,119	)
Increase in accounts payable, accrued expenses, other payables and income taxes		26,060			68,994
Increase (decrease) in other long-term liabilities		10,573			(497	)

Net cash flows from (used by) operating activities		(15,414	)		13,471

Cash flows from (used by) investing activities:
Capital expenditures		(23,067	)		(87,346	)
Proceeds from the sale of property, plant and equipment and other		51,872			456
Proceeds from the sale of equity method investments		4,224			—
Acquisitions, net of cash acquired		—			(2,448	)
Increase in deposit for letters of credit		(2,393	)		(27,167	)

Net cash flows from (used by) investing activities		30,636			(116,505	)

Cash flows from (used by) financing activities:
Decrease in documentary letters of credit		(120,024	)		(79,544	)
Short-term borrowings, net change		603			82,459
Repayments on long-term debt		(14,987	)		(14,458	)
Proceeds from issuance of long-term debt		639			21,493
Stock issued under incentive and purchase plans		9,957			9,289
Cash dividends		(27,460	)		(27,070	)
Purchase of noncontrolling interests		(3,573	)		—
Tax benefits from stock plans		2,302			2,607

Net cash flows used by financing activities		(152,543	)		(5,224	)

Effect of exchange rate changes on cash		3,029			(192	)

Decrease in cash and cash equivalents		(134,292	)		(108,450	)
Cash and cash equivalents at beginning of year		399,313			405,603

Cash and cash equivalents at end of period	$	265,021		$	297,153

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


	CMC Stockholders’ Equity
								Accumulated
	Common Stock				Additional			Other						Treasury Stock
	Number of				Paid-In			Comprehensive			Retained			Number of						Noncontrolling
(in thousands, except share data)	Shares		Amount		Capital			Income (Loss)			Earnings			Shares			Amount			Interests			Total
Balance, September 1, 2009		129,060,664	$	1,290	$	380,737		$	34,257		$	1,438,205			(16,487,231	)	$	(324,796	)	$	2,371		$	1,532,064
Comprehensive income (loss):
Net loss for the six months ended February 28, 2010												(204,519	)								(85	)		(204,604	)
Other comprehensive income (loss):
Foreign currency translation adjustment									(4,504	)											10			(4,494	)
Unrealized gain on derivatives, net of taxes ($1)									222															222
Defined benefit obligation, net of taxes ($267)									(508	)														(508	)

Comprehensive loss																								(209,384	)
Cash dividends												(27,070	)											(27,070	)
Issuance of stock under incentive and purchase plans, net						(21,589	)								1,547,434			30,878						9,289
Share-based compensation						5,575																		5,575
Tax benefits from stock plans						2,607																		2,607

Balance, February 28, 2010		129,060,664	$	1,290	$	367,330		$	29,467		$	1,206,616			(14,939,797	)	$	(293,918	)	$	2,296		$	1,313,081


	CMC Stockholders’ Equity
								Accumulated
	Common Stock				Additional			Other						Treasury Stock
	Number of				Paid-In			Comprehensive			Retained			Number of						Noncontrolling
(in thousands, except share data)	Shares		Amount		Capital			Income (Loss)			Earnings			Shares			Amount			Interests			Total
Balance, September 1, 2010		129,060,664	$	1,290	$	373,308		$	(12,526	)	$	1,178,372			(14,735,315	)	$	(289,708	)	$	2,638		$	1,253,374
Comprehensive income (loss):
Net earnings (loss) for the six months ended February 28, 2011												(45,511	)								108			(45,403	)
Other comprehensive income:
Foreign currency translation adjustment									62,266															62,266
Unrealized gain on derivatives, net of taxes ($159)									298															298

Comprehensive income																								17,161
Cash dividends												(27,460	)											(27,460	)
Issuance of stock under incentive and purchase plans, net						(11,541	)								1,082,760			21,498						9,957
Share-based compensation						6,026																		6,026
Purchase of noncontrolling interests						(1,521	)														(2,052	)		(3,573	)
Tax benefits from stock plans						2,302																		2,302

Balance, February 28, 2011		129,060,664	$	1,290	$	368,574		$	50,038		$	1,105,401			(13,652,555	)	$	(268,210	)	$	694		$	1,257,787

See notes to unaudited consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 — QUARTERLY FINANCIAL DATA

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States on a basis consistent with that used in Commercial Metals Company’s (the “Company” or “CMC”) Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended August 31, 2010, and include all normal recurring adjustments necessary to present fairly the consolidated balance sheets and statements of operations, cash flows and stockholders’ equity for the periods indicated. These notes should be read in conjunction with such Form 10-K. The results of operations for the six month period are not necessarily indicative of the results to be expected for a full year.

NOTE 2 — ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

In the first quarter of 2011, the Company adopted accounting guidance related to the accounting for transfers of financial assets. The guidance 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 removed from the balance sheet when the transferor has not transferred the entire original financial asset.

In the first quarter of 2011, the Company adopted accounting guidance related to the accounting for variable interest entities (“VIE”). The guidance requires a qualitative analysis to determine whether the interest in a VIE gives it a controlling financial interest and requires ongoing reassessments of whether an entity is the primary beneficiary of a VIE. The adoption had no impact on the Company’s consolidated financial statements.

NOTE 3 — SALES OF ACCOUNTS RECEIVABLE

The Company’s existing accounts receivable securitization agreement of $100 million expired on January 31, 2011. On April 5, 2011, the Company entered into a $100 million accounts receivable sale agreement. See note 17, Subsequent Events, for more information.

The Company’s accounts receivable securitization program was used as a short-term financing alternative. Under this program, the Company and several of its subsidiaries periodically sold 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, transferred all eligible trade accounts receivable to CMCRV. Depending on the Company’s level of financing needs, CMCRV would sell an undivided percentage ownership interest in the pool of receivables to affiliates of third party financial institutions. At August 31, 2010, accounts receivable of $190 million had been sold to CMCRV. The Company’s undivided interest in these receivables (representing the Company’s retained interest) was 100% at August 31, 2010.

In addition to the securitization program described above, the Company’s international subsidiaries in Europe and Australia periodically sell accounts receivable without recourse. These arrangements constitute true sales, and once the accounts are sold, they are no longer available to satisfy the Company’s creditors in the event of bankruptcy. Uncollected accounts receivable sold under these arrangements and removed from the consolidated balance sheets were $139.0 million and $103.9 million at February 28, 2011 and August 31, 2010, respectively. The Australian program contains financial covenants in which the subsidiary must meet certain coverage and tangible net worth levels, as defined. At February 28, 2011, the Australian subsidiary was in compliance with these covenants.

During the six months ended February 28, 2011 and 2010, proceeds from the sales of receivables were $499.8 million and $309.4 million, respectively, and cash payments to the owners of receivables were $464.7 million and $322.9 million, respectively. Discounts on sales of accounts receivable were $2.1 million and $1.7 million for the six months ended February 28, 2011 and 2010, respectively. These discounts primarily represented the costs of funds and were included in selling, general and administrative expenses.

NOTE 4 — INVENTORIES

Inventories are stated at the lower of cost or market. Inventory cost for most domestic inventories is determined by the last-in, first-out method (“LIFO”). LIFO inventory reserves were $291.7 million and $230.3 million at February 28, 2011 and August 31, 2010, respectively. Inventory cost for international inventories and the remaining domestic inventories are determined by the first-in, first-out method (“FIFO”). The majority of the Company’s inventories are in the form of finished goods, with minimal work in process. At February 28, 2011 and August 31, 2010, $130.1 million and $59.1 million, respectively, were in raw materials.

NOTE 5 — GOODWILL AND OTHER INTANGIBLE ASSETS

The Company tests for impairment of goodwill by estimating the fair value of each reporting unit compared to its carrying value. The Company’s reporting units are based on its internal reporting structure and represent an operating segment or a reporting level below an operating segment. Additionally, the reporting units are aggregated based upon similar economic characteristics, nature of products and services, nature of production processes, type of customers and distribution methods. The Company has determined its operating units that have a significant amount of goodwill to be in the Americas Recycling and Americas Fabrication segments. 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. These estimates could be materially impacted by adverse changes in 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 total gross carrying amounts of the Company’s intangible assets that were subject to amortization were $72.7 million and $73.9 million at February 28, 2011 and August 31, 2010, respectively, and are included in other noncurrent assets. Aggregate amortization expense for intangible assets for the three months ended February 28, 2011 and 2010 was $2.5 million and $5.6 million, respectively. Aggregate amortization expense for intangible assets for the six months ended February 28, 2011 and 2010 was $5.0 million and $8.6 million, respectively.

NOTE 6 — SEVERANCE

During the three and six months ended February 28, 2011, the Company recorded severance costs of $0.9 million and $1.3 million, respectively. During the three and six months ended February 28, 2010, the Company recorded severance costs of $14.4 million and $16.6 million, respectively. These severance costs relate to involuntary employee terminations initiated as part of the Company’s focus on operating expense management and reductions in headcount. Additionally, during the second quarter of 2010, the Company incurred severance costs associated with exiting the joist and deck business.

NOTE 7 — DISCONTINUED OPERATIONS AND DISPOSITIONS

On February 26, 2010, the Company’s Board of Directors approved a plan to exit the joist and deck business through the sale of those facilities. The Company determined that the decision to exit this business met the definition of a discontinued operation. As a result, this business has been presented as a discontinued operation for all periods. The Company recorded $26.8 million to impair plant, property and equipment, $4.5 million to write-off intangible assets, $7.4 million of inventory valuation adjustments and $6.7 million of severance during the second quarter of 2010. The joist and deck business was in the Americas Fabrication segment.

During the fourth quarter of 2010, the Company completed the sale of the majority of the deck assets and during the first quarter of 2011, the Company completed the sale of the majority of the joist assets resulting in a gain of $1.9 million.

Various financial information for discontinued operations is as follows:


	February 28,		August 31,
(in thousands)	2011		2010
Current assets	$	1,449	$	10,850
Noncurrent assets		12,125		27,045
Current liabilities		9,378		14,723
Noncurrent liabilities		—		22


	Three Months Ended						Six Months Ended
	February 28,						February 28,
	2011			2010			2011		2010
Revenue		204			28,815			1,119		73,415
Earnings (loss) before taxes		(21	)		(62,356	)		647		(66,514	)

During the first quarter of 2011, CMC Construction Services, a subsidiary of the Company included in the Americas Fabrication segment, completed the sale of heavy forming and shoring equipment for approximately $35 million. The Company recorded a loss on sale of approximately $0.5 million in connection with this transaction.

NOTE 8 — CREDIT ARRANGEMENTS

The Company’s revolving credit facility of $400 million has a maturity date of November 24, 2012 and includes certain covenants. The Company is required to maintain a minimum interest coverage ratio of not less than 2.50 to 1.00 for the twelve month cumulative period ended February 28, 2011 and for each fiscal quarter on a rolling twelve month cumulative period thereafter. At February 28, 2011, the Company’s interest coverage ratio was 2.65 to 1.00. The agreement also requires the Company to maintain a debt to capitalization ratio covenant not greater than 0.60 to 1.00. At February 28, 2011, the Company’s debt to capitalization ratio was 0.52 to 1.00. The agreement provides for interest based on LIBOR, Eurodollar or Bank of America’s prime rate. The facility fee is 60 basis points per annum and no compensating balances are required.

It is the Company’s policy to maintain contractual bank credit lines equal to 100% of the amount of the commercial paper program. The Company had $10 million outstanding at February 28, 2011 and August 31, 2010 under the commercial paper program. There were no amounts outstanding on the revolving credit facility at February 28, 2011 and August 31, 2010. The availability under the revolving credit agreement is reduced by the outstanding amount under the commercial paper program. At February 28, 2011, $390 million was available under the revolving credit agreement.

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, foreign exchange transactions and short term advances which are priced at market rates.

Long-term debt, including the net effect of interest rate swap revaluation adjustments, is as follows:


	February 28,		August 31,
(in thousands)	2011		2010
5.625% notes due November 2013 (weighted average rate of 3.5% at February 28, 2011)	$	203,758	$	208,253
6.50% notes due July 2017		400,000		400,000
7.35% notes due August 2018 (weighted average rate of 5.5% at February 28, 2011)		502,484		524,185
CMCZ term note due May 2013		62,803		69,716
CMCS financing agreement		20,705		19,006
Other, including equipment notes		6,342		6,710

		1,196,092		1,227,870
Less current maturities		36,569		30,588

	$	1,159,523	$	1,197,282

Interest on the notes, except for the CMC Zawiercie (“CMCZ”) note, is payable semiannually.

On March 23, 2010, the Company entered into two interest rate swap transactions (“Swap Transactions”). The Swap Transactions were designated as fair value hedges at inception and convert all fixed rate interest to floating rate interest on the Company’s 5.625% notes due 2013 and $300 million on its fixed rate 7.35% notes due 2018. Swap Transactions with regard to the 5.625% notes and the 7.35% notes have notional amounts of $200 million and $300 million and termination dates of November 15, 2013 and August 15, 2018, respectively. The Swap Transactions costs are based on the floating LIBOR plus 303 basis points with respect to the 5.625% notes and LIBOR plus 367 basis points with respect to the 7.35% notes.

CMCZ has a five year term note of PLN 180 million ($62.8 million) with a group of four banks. The term note is used to finance operating expenses of CMCZ and the development of a rolling mill. The note has scheduled principal and interest payments in fifteen equal quarterly installments which began in November 2009 with the final installment in May 2013. The weighted average interest rate at February 28, 2011 was 6.4%. The term note contains four financial covenants for CMCZ. At February 28, 2011, CMCZ was not in compliance with one of the financial covenants which resulted in a guarantee by Commercial Metals Company continuing to be 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 covenant for two consecutive quarters.

CMC Sisak (“CMCS”) has a five year financing agreement of EUR 40 million ($55.2 million) which allows for disbursements as funds are needed. The loan is intended to be used for capital expenditures and other uses. At February 28, 2011, EUR 15.0 million ($20.7 million) was outstanding under this note. The note has scheduled principal and interest payments in seven semiannual installments beginning in July 2011 and ending in July 2014. The weighted average interest rate at February 28, 2011 was 5.0%.

Interest of $0.4 million and $3.2 million was capitalized in the cost of property, plant and equipment constructed for the six months ended February 28, 2011 and 2010, respectively. Interest of $36.6 million and $42.6 million was paid for the six months ended February 28, 2011 and 2010, respectively.

NOTE 9 — DERIVATIVES AND RISK MANAGEMENT

The Company’s worldwide operations and product lines expose it to risks from fluctuations in metals commodity prices, foreign currency exchange rates, natural gas prices and interest rates. The objective of the Company’s risk management program is to mitigate these risks using 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. 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 enters into interest rate swap contracts to maintain a portion of the Company’s debt obligations at variable interest rates. These interest rate swap contracts, under which the Company has agreed to pay variable rates of interest and receive fixed rates of interest, are designated as fair value hedges of fixed rate debt. The Company’s interest rate swap contract commitments were $500 million as of February 28, 2011.

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

Gross foreign currency exchange contract commitments as of February 28, 2011 (in thousands):


Functional Currency			Contract Currency
Type	Amount		Type	Amount
AUD		470	EUR		344
AUD		429	NZD		577
AUD		66,783	USD		66,345
AUD		303	CNY		2,000
EUR		1,293	HRK*		9,591
EUR		15,413	USD		20,995
GBP		1,059	EUR		1,250
GBP		12,101	USD		19,244
PLN		362,168	EUR		91,443
PLN		101,284	USD		34,474
PLN		774	SEK**		1,813
SGD		8,811	USD		6,900
USD		42,125	EUR		30,663
USD		27,834	GBP		17,165
USD		1,166	JPY		97,010
USD		13,800	SGD***		17,622


*		Croatian kuna

**		Swedish krona

***		Singapore dollar

Commodity contract commitments as of February 28, 2011:


Commodity	Long/Short	Total
Aluminum	Long	6,525	MT
Aluminum	Short	3,200	MT
Copper	Long	1,632	MT
Copper	Short	5,659	MT
Zinc	Long	15	MT
Natural Gas	Long	20,000	MMBtu


•		MT = Metric Ton

•		MMBtu = One million British thermal units

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the statements of operations, and there were no components excluded from the assessment of hedge effectiveness for the three months and six months ended February 28, 2011 and 2010. 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):


		Three Months Ended						Six Months Ended
Derivatives Not Designated as Hedging		February 28,						February 28,
Instruments	Location	2011			2010			2011			2010
Commodity	Cost of goods sold	$	(5,754	)	$	(5,924	)	$	(16,040	)	$	(4,748	)
Foreign exchange	Net sales		14			(304	)		(4	)		(40	)
Foreign exchange	Cost of goods sold		289			(469	)		869			(385	)
Foreign exchange	SG&A expenses		2,485			1,218			(839	)		37

Loss before taxes		$	(2,966	)	$	(5,479	)	$	(16,014	)	$	(5,136	)

The Company’s fair value hedges are designated for accounting purposes with gains and losses on the hedged (underlying) items offsetting the gain or loss on the related derivative transaction. Hedged (underlying) items relate to firm commitments on commercial sales and purchases, capital expenditures and fixed rate debt obligations. As of February 28, 2011, fair value hedge accounting for interest rate swap contracts increased the carrying value of debt instruments by $6.2 million.


		Three Months Ended					Six Months Ended
Derivatives Designated as Fair Value Hedging		February 28,					February 28,
Instruments	Location	2011			2010		2011			2010
Foreign exchange	SG&A expenses	$	(888	)	$	2,646	$	(8,775	)	$	(6,041	)
Interest rate	Interest expense		(15,315	)		—		6,240			—

Gain (loss) before taxes		$	(16,203	)	$	2,646	$	(2,535	)	$	(6,041	)


		Three Months Ended					Six Months Ended
Hedged (Underlying) Items Designated as Fair Value Hedging		February 28,					February 28,
Instruments	Location	2011		2010			2011			2010
Foreign exchange	Net sales	$	11	$	(55	)	$	49		$	6
Foreign exchange	SG&A expenses		884		(2,587	)		8,732			6,035
Interest rate	Interest expense		15,314		—			(6,241	)		—

Gain (loss) before taxes		$	16,209	$	(2,642	)	$	2,540		$	6,041

The Company recognizes the impact of actual and estimated net periodic settlements of current interest on our active interest rate swaps as adjustments to interest expense. The following table summarizes the impact of actual and estimated periodic settlements of active swap agreements on the results of operations:


	Three Months Ended				Six Months Ended
	February 28,				February 28,
Hedge Accounting for Interest Rate Swaps	2011		2010		2011		2010
Reductions to interest expense from periodic estimated and actual settlements of active swap agreements*	$	3,508	$	—	$	6,792	$	—


*		Amounts represent the net of the Company’s periodic variable-rate interest obligations and the swap counterparty’s fixed-rate interest obligations. The Company’s variable-rate obligations are based on a spread from the six-month LIBOR in arrears.


Effective Portion of Derivatives
Designated as Cash Flow Hedging Instruments	Three Months Ended					Six Months Ended
Recognized in Accumulated	February 28,					February 28,
Other Comprehensive Income (Loss)	2011		2010			2011		2010
Commodity	$	355	$	(6	)	$	392	$	54
Foreign exchange		154		(60	)		171		265

Gain (loss), net of taxes	$	509	$	(66	)	$	563	$	319


Effective Portion of Derivatives
Designated as Cash Flow Hedging Instruments		Three Months Ended					Six Months Ended
Reclassified from Accumulated		February 28,					February 28,
Other Comprehensive Income (Loss)	Location	2011		2010			2011			2010
Commodity	Cost of goods sold	$	53	$	13		$	(30	)	$	(15	)
Foreign exchange	SG&A expenses		33		(87	)		66			(117	)
Interest rate	Interest expense		115		115			229			229

Gain, net of taxes		$	201	$	41		$	265		$	97

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


Derivative Assets	February 28, 2011		August 31, 2010
Commodity — designated	$	393	$	80
Commodity — not designated		2,687		911
Foreign exchange — designated		359		435
Foreign exchange — not designated		618		1,188
Interest rate — designated		11,760		12,173
Long-term interest rate — designated		372		20,265

Derivative assets (other current assets and other assets)*	$	16,189	$	35,052


Derivative Liabilities	February 28, 2011		August 31, 2010
Commodity — designated	$	17	$	95
Commodity — not designated		2,819		2,817
Foreign exchange — designated		1,404		1,749
Foreign exchange — not designated		1,766		1,097
Long-term interest rate — designated		5,890		—

Derivative liabilities (accrued expenses, other payables and long-term liabilities)*	$	11,896	$	5,758


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

As of February 28, 2011, all of the Company’s derivative instruments designated to hedge exposure to the variability in future cash flows of the forecasted transactions will mature within twelve months.

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

NOTE 10 — FAIR VALUE

The Company has established 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 were measured at fair value on a recurring basis:


			Fair Value Measurements at Reporting Date Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
	February 28,		Identical Assets		Observable Inputs		Unobservable Inputs
(in thousands)	2011		(Level 1)		(Level 2)		(Level 3)
Money market investments	$	228,880	$	228,880	$	—	$	—
Derivative assets		16,189		2,687		13,502		—
Nonqualified benefit plan assets *		54,872		54,872		—		—
Derivative liabilities		11,896		2,819		9,077		—
Nonqualified benefit plan liabilities *		91,080		—		91,080		—

	August 31,
	2010
Money market investments	$	352,881	$	352,881	$	—	$	—
Derivative assets		35,052		911		34,141		—
Nonqualified benefit plan assets *		43,681		43,681		—		—
Derivative liabilities		5,758		2,817		2,941		—
Nonqualified benefit plan liabilities *		86,043		—		86,043		—


*		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.

The Company’s long-term debt is predominantly publicly held. The fair value was approximately $1.23 billion at February 28, 2011 and $1.29 billion at August 31, 2010. Fair value was determined by indicated market values.

NOTE 11 — INCOME TAXES

The Company had net refunds of $75.7 million and paid $8.7 million in income taxes during the six months ended February 28, 2011 and 2010, respectively.

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


	Three Months Ended						Six Months Ended
	February 28,						February 28,
	2011			2010			2011			2010
Statutory rate		35.0	%		35.0	%		35.0	%		35.0	%
State and local taxes		0.6			2.2			0.3			2.7
Foreign rate differential		(11.3	)		(6.6	)		(13.0	)		(5.4	)
Increase in valuation allowance due to foreign losses without benefit (predominately Croatia)		(4.3	)		(15.0	)		(11.6	)		(11.7	)
Domestic production activity deduction		(1.3	)		—			(1.0	)		—
Other		2.7			(0.6	)		1.5			(1.0	)

Effective rate from continuing operations		21.4	%		15.0	%		11.2	%		19.6	%

The Company’s effective tax rate from discontinued operations for the three and six months ended February 28, 2011 was 38.1% and 38.8%, respectively, and for the three and six months ended February 28, 2010 was 38.9% and 38.8%, respectively.

The reserve for unrecognized tax benefits relating to the accounting for uncertainty in income taxes was $20.4 million, exclusive of interest and penalties, as of February 28, 2011 and August 31, 2010.

The Company policy classifies interest recognized on an underpayment of income taxes and any statutory penalties recognized on a tax position as tax 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. For the three and six months ended February 28, 2011, before any tax benefits, the Company recorded immaterial amounts of accrued interest and penalties on unrecognized tax benefits.

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

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

U.S Federal — 2006 and forward
U.S. States — 2006 and forward
Foreign — 2004 and forward

The Federal tax returns for fiscal years 2006 to 2008 are under examination by the Internal Revenue Service. However, we believe our recorded tax liabilities as of February 28, 2011 sufficiently reflect the anticipated outcome of these examinations.

NOTE 12 — SHARE-BASED COMPENSATION

The Company recognized share-based compensation expense of $3.9 million and $3.2 million for the three months ended February 28, 2011 and 2010, respectively, and $6.0 million and $5.6 million for the six months ended February 28, 2011 and 2010, respectively, as a component of selling, general and administrative expenses. At February 28, 2011, the Company had $23.1 million of total unrecognized pre-tax compensation cost related to non-vested share-based compensation arrangements, of which, $15.1 million related to share-based awards granted during the second quarter of 2011. This cost is expected to be recognized over the next 39 months.

Combined information for shares subject to options and stock appreciation rights (“SARs”) for the six months ended February 28, 2011 were as follows:


				Weighted
				Average		Price
				Exercise		Range
	Number			Price		Per Share
September 1, 2010
Outstanding		3,922,016		$	23.67	$	7.53 — 35.38
Exercisable		3,503,681			23.38		7.53 — 35.38
Granted		112,000			16.83	16.83
Exercised		(791,123	)		7.84		7.53 — 13.58
Forfeited		(36,520	)		33.54		24.57 — 35.38

February 28, 2011
Outstanding		3,206,373		$	27.22	$	7.78 — 35.38
Exercisable		2,793,255			27.24		7.78 — 35.38

Share information for options and SARs at February 28, 2011:


Outstanding							Exercisable
			Weighted
			Average		Weighted				Weighted
Range of			Remaining		Average				Average
Exercise	Number		Contractual		Exercise		Number		Exercise
Price	Outstanding		Life (Yrs.)		Price		Outstanding		Price
$7.78		27,300		—	$	7.78		27,300	$	7.78
11.00 — 14.05		753,815		2.6		12.40		690,815		12.25
16.83 — 24.71		556,742		2.9		22.96		444,742		24.51
31.75 — 35.38		1,868,516		3.2		34.76		1,630,398		34.67

$7.78 — 35.38		3,206,373		3.0	$	27.22		2,793,255	$	27.24

Of the Company’s previously granted restricted stock awards 1,934 and 19,584 shares vested during the six months ended February 28, 2011 and February 28, 2010, respectively.

During the second quarter of 2011, the Compensation Committee (the “Committee”) of the Board of Directors approved a grant to employees of approximately 670,000 restricted stock units. These awards vest over a three-year period in increments of one-third per year. The Committee also approved a grant of performance stock units. The performance awards will vest upon the achievement of certain target levels of the performance goals and objectives of the Company over the performance period of approximately three

years. The actual number of performance awards granted will be based on the level of achievement. Upon achievement of any of the performance goals, the awards will be paid out 50% in shares of common stock of the Company and 50% in cash. The Company has accounted for the cash component of the performance award as a liability award and the value will be adjusted to fair market value each period. All equity awards are valued at the fair market value at the date of grant. Prior to vesting, the restricted stock unit and the performance stock unit recipients do not receive an amount equivalent to any dividend declared on the Company’s common stock.

NOTE 13 — STOCKHOLDERS’ EQUITY AND EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO CMC

In calculating earnings (loss) per share, there were no adjustments to net earnings (loss) to arrive at earnings (loss) for any years presented.

Three Months Ended

Six Months Ended

February 28,

2011

2010

2011

2010

Shares outstanding for basic and diluted earnings (loss) per share

114,736,984

113,275,457

114,528,001

112,885,377

For the three and six months ended February 28, 2011 and 2010, no stock options, restricted stock or SARs were included in the calculation of dilutive shares because the Company reported a loss from continuing operations. All stock options and SARs expire by 2018.

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

The Company purchased no shares during the first six months of 2011 and had remaining authorization to purchase 8,259,647 shares of its common stock at February 28, 2011.

NOTE 14 — COMMITMENTS AND CONTINGENCIES

See Note 12, Commitments and Contingencies, to the consolidated financial statements in the Annual Report on Form 10-K for the year ended August 31, 2010 relating to environmental and other matters. There have been no significant changes to the matters noted therein. In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. Management believes that adequate provisions have been made in the consolidated financial statements for the potential impact of these issues, and that the outcomes will not significantly impact the results of operations or the financial position of the Company, although they may have a material impact on earnings (loss) for a particular quarter.

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.

Effective September 1, 2010, the Company’s scrap metal processing facilities which directly support the domestic mills are included as part of the Americas Mills segment. Prior to September 1, 2010, these facilities were included as part of the Americas Recycling segment. All prior period financial information has been recast to the current segment reporting structure.

The Company structures the business into the following five segments: Americas Recycling, Americas Mills, Americas Fabrication, International Mills and International Marketing and Distribution. The Americas Recycling segment consists of the scrap metal processing and sales operations primarily in Texas, Florida and the southern United States. The Americas Mills segment includes the Company’s domestic steel mills, including the scrap processing facilities which directly support these mills, and the copper tube minimill. The copper tube minimill is aggregated with the Company’s steel mills because it has similar economic characteristics. The Americas Fabrication segment consists of the Company’s rebar fabrication operations, fence post manufacturing plants, construction-related and other products facilities. The International Mills segment includes the minimills in Poland and Croatia, recycling operations in Poland and fabrication operations in Europe, which have been presented as a separate segment because the economic characteristics of their markets and the regulatory environment in which they operate are different from that of the Company’s

domestic mills and rebar fabrication operations. International Marketing and Distribution includes international operations for the sales, distribution and processing of steel products, ferrous and nonferrous metals and other industrial products. Additionally, the International Marketing and Distribution segment includes the Company’s two U.S. based trading and distribution divisions, CMC Cometals and CMC Cometals Steel (previously CMC Dallas Trading). The international distribution operations consist only of physical transactions and not positions taken for speculation. Corporate contains expenses of the Company’s corporate headquarters and interest expense relating to its long-term public debt and commercial paper program.

The financial information presented for the Americas Fabrication segment excludes its joist and deck fabrication operations. This operation has been classified as discontinued operations in the consolidated statements of operations. See Note 7, Discontinued Operations and Dispositions, for more detailed information.

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 from continuing operations by reportable segment:


	Three Months Ended February 28, 2011
	Americas							International
											Marketing
											and
(in thousands)	Recycling		Mills		Fabrication			Mills			Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	411,979	$	303,460	$	248,410		$	211,736		$	610,772	$	5,409		$	—		$	1,791,766
Intersegment sales		38,583		174,461		3,560			9,619			11,903		—			(238,126	)		—
Net sales		450,562		477,921		251,970			221,355			622,675		5,409			(238,126	)		1,791,766
Adjusted operating profit (loss)		10,865		10,945		(49,566	)		(7,378	)		12,372		(16,468	)		(232	)		(39,462	)


	Three Months Ended February 28, 2010
	Americas									International
													Marketing
													and
(in thousands)	Recycling			Mills			Fabrication			Mills			Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	263,663		$	193,836		$	230,544		$	107,122		$	524,954	$	2,324		$	—		$	1,322,443
Intersegment sales		26,946			139,987			1,744			26,139			4,257		—			(199,073	)		—
Net sales		290,609			333,823			232,288			133,261			529,211		2,324			(199,073	)		1,322,443
Adjusted operating profit (loss)		(6,834	)		(17,860	)		(57,317	)		(54,396	)		11,079		(18,960	)		6,295			(137,993	)


	Six Months Ended February 28, 2011
	Americas							International
											Marketing
											and
(in thousands)	Recycling		Mills		Fabrication			Mills			Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	759,148	$	584,241	$	532,353		$	435,657		$	1,251,180	$	11,667		$	—		$	3,574,246
Intersegment sales		67,209		329,077		7,370			18,494			17,401		—			(439,551	)		—
Net sales		826,357		913,318		539,723			454,151			1,268,581		11,667			(439,551	)		3,574,246
Adjusted operating profit (loss)		19,057		45,088		(71,574	)		(15,044	)		36,610		(27,071	)		71			(12,863	)
Goodwill		7,267		295		57,144			3,105			4,485		—			—			72,296
Total assets		301,688		648,973		602,598			812,943			724,045		887,469			(355,385	)		3,622,331


	Six Months Ended February 28, 2010
	Americas									International
													Marketing
													and
(in thousands)	Recycling			Mills			Fabrication			Mills			Distribution		Corporate			Eliminations			Consolidated
Net sales-unaffiliated customers	$	504,161		$	373,452		$	490,985		$	259,244		$	1,090,976	$	5,883		$	—		$	2,724,701
Intersegment sales		51,976			267,906			3,776			57,286			11,321		—			(392,265	)		—
Net sales		556,137			641,358			494,761			316,530			1,102,297		5,883			(392,265	)		2,724,701
Adjusted operating profit (loss)		(8,044	)		(17,879	)		(66,233	)		(73,488	)		31,217		(39,164	)		10,961			(162,630	)
Goodwill		6,961			601			57,144			2,841			4,000		—			—			71,547
Total assets		235,336			599,187			707,614			641,173			678,873		966,292			(293,627	)		3,534,848

The following table provides a reconciliation of net loss from continuing operations attributable to CMC to adjusted operating profit (loss):


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands)	2011			2010			2011			2010
Net loss from continuing operations attributable to CMC	$	(46,149	)	$	(135,161	)	$	(45,907	)	$	(163,845	)
Noncontrolling interests		17			(91	)		108			(85	)
Income tax benefit		(12,535	)		(23,858	)		(5,805	)		(40,053	)
Interest expense		18,278			20,236			36,603			39,687
Discounts on sales of accounts receivable		927			881			2,138			1,666

Adjusted operating loss from continuing operations	$	(39,462	)	$	(137,993	)	$	(12,863	)	$	(162,630	)
Adjusted operating profit (loss) from discontinued operations		(18	)		(62,353	)		650			(66,508	)

Adjusted operating loss	$	(39,480	)	$	(200,346	)	$	(12,213	)	$	(229,138	)

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


	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2011		2010		2011		2010
Major product information:
Steel products	$	963,815	$	757,906	$	2,018,586	$	1,616,219
Industrial materials		278,062		170,060		491,908		354,685
Non-ferrous scrap		254,199		160,263		474,471		310,872
Ferrous scrap		180,968		116,651		341,387		216,752
Construction materials		44,236		49,816		102,463		102,317
Non-ferrous products		45,913		45,717		90,980		79,740
Other		24,573		22,030		54,451		44,116

Net sales	$	1,791,766	$	1,322,443	$	3,574,246	$	2,724,701


	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2011		2010		2011		2010
Geographic area:
United States	$	1,001,263	$	702,458	$	1,961,084	$	1,348,024
Europe		362,724		246,177		779,583		533,628
Asia		159,399		210,219		372,995		477,824
Australia/New Zealand		228,316		114,807		366,917		262,141
Other		40,064		48,782		93,667		103,084

Net sales	$	1,791,766	$	1,322,443	$	3,574,246	$	2,724,701

NOTE 16 — RELATED PARTY TRANSACTIONS

One of the Company’s international subsidiaries had a marketing and distribution agreement with a key supplier of which the Company owns an 11% interest. This marketing and distribution agreement expired on December 31, 2010. The Company owned a 50% interest in two joint ventures related to this agreement. During the second quarter of 2011, the Company sold the interest in one joint venture for approximately $1.7 million resulting in a minimal gain. The interest in the remaining joint venture is expected to be sold during the third quarter of 2011. The following presents related party transactions:


	Six Months Ended
	February 28,
(in thousands)	2011		2010
Sales	$	131,361	$	138,906
Purchases		146,407		150,314

	February 28,		August 31,
(in thousands)	2011		2010
Accounts receivable	$	2,613	$	10,611
Accounts payable		1,075		22,603

NOTE 17, SUBSEQUENT EVENTS

On April 5, 2011, the Company and several of its subsidiaries (together with the Company, the “Originators”) entered into a two year sale of accounts receivable program (the “Receivables Program”). Pursuant to the Receivables Program, the Company periodically contributes and the Originators periodically sell certain trade accounts receivable (the “Receivables”) to a special purpose wholly-owned subsidiary of the Company, CMC Receivables, Inc. (“CMCRV”), in accordance with a Receivables Sale Agreement between the Originators and CMCRV. CMCRV, in turn, sells the receivables in their entirety to purchasers (collectively, the “Purchasers”) pursuant to a Receivables Purchase Agreement between CMCRV, the Company, as servicer, Wells Fargo Bank, N.A., as administrative agent for the Purchasers, and the Purchasers. The Company has guaranteed the performance by the Originators of their obligations under the Receivables Sale Agreement in favor of CMCRV in accordance with a Performance Undertaking.

The Company, as servicer, and the other Originators, as sub-servicers, retain collection and administrative responsibilities for the Receivables. The continuation of the Receivables Program is subject to the performance of certain obligations and covenants by CMCRV. The maximum facility is $100 million; however, subject to certain conditions, the maximum facility may be increased up to $200 million.

The proceeds from the Receivables Program will be used to pay transactions costs, for working capital, and for other corporate purposes.

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K filed with the SEC for the year ended August 31, 2010.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are not different from the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K filed with the SEC for the year ended August 31, 2010 and are, therefore, not presented herein.

CONSOLIDATED RESULTS OF OPERATIONS


	Three Months Ended						Increase			Six Months Ended						Increase
	February 28,						(Decrease)			February 28,						(Decrease)
(in millions)	2011			2010			%			2011			2010			%
Net sales*	$	1,791.7		$	1,322.4			35	%	$	3,574.2		$	2,724.7			31	%
Net loss from continuing operations attributable to CMC		(46.2	)		(135.3	)		(66	%)		(45.9	)		(163.9	)		(72	%)
Adjusted EBITDA		0.6			(124.1	)		100	%		67.2			(110.0	)		161	%


*		Excludes divisions classified as discontinued operations.

In the table above, we have included a financial statement measure that was not derived in accordance with accounting principles generally accepted in the United States (“GAAP”). We use adjusted EBITDA (earnings before interest expense, income taxes, depreciation, amortization and impairment charges) as a non-GAAP performance measure. In calculating adjusted EBITDA, we exclude our largest recurring non-cash charge, depreciation and amortization as well as impairment charges. Adjusted 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 adjusted EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our long-term cash incentive performance plan for management and part of a debt compliance test for our revolving credit agreement. Reconciliations from net loss from continuing operations attributable to CMC to adjusted EDITDA are provided below:


	Three Months Ended						Increase			Six Months Ended						Increase
	February 28,						(Decrease)			February 28,						(Decrease)
(in millions)	2011			2010			%			2011			2010			%
Net loss from continuing operations attributable to CMC	$	(46.2	)	$	(135.3	)		(66	%)	$	(45.9	)	$	(163.9	)		(72	%)
Interest expense		18.3			20.2			(9	%)		36.6			39.7			(8	%)
Income tax benefit		(12.5	)		(23.9	)		(48	%)		(5.8	)		(40.1	)		(86	%)
Depreciation, amortization and impairment charges		41.0			40.3			2	%		81.6			81.9			—

Adjusted EBITDA from continuing operations	$	0.6		$	(98.7	)		101	%	$	66.5		$	(82.4	)		181	%
Adjusted EBITDA from discontinued operations		—			(25.4	)		100	%		0.7			(27.6	)		103	%

Adjusted EBITDA	$	0.6		$	(124.1	)		100	%	$	67.2		$	(110.0	)		161	%

Our adjusted EBITDA does not include interest expense, income taxes, depreciation, amortization and impairment charges. 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. Impairment charges, when necessary, accelerate the write-off of fixed assets that would otherwise have been accomplished by periodic depreciation charges. 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 loss determined under GAAP, as well as adjusted EBITDA, to evaluate our performance. Also, we separately analyze any significant fluctuations in interest expense, depreciation, amortization, impairment charges and income taxes.

The following events and performances had a significant impact during our second quarter of 2011 as compared to the same period of 2010 or are expected to be significant for our future operations:

	•		Net sales of the Americas Recycling segment increased 55% and adjusted operating results increased $17.7 million during the second quarter of 2011 as compared to the prior year’s second quarter primarily from improved demand which drove an increase in prices and volumes.

	•		Net sales of the Americas Mills segment increased 43% and adjusted operating results increased $28.8 million from the prior year’s second quarter primarily due to higher shipments and a 16% increase in metal margins.

	•		Our Americas Fabrication segment continues to experience unfavorable market conditions due to weak commercial construction. However, this segment did show improvement over the second quarter of 2010 as sales increased 8% and adjusted operating loss decreased $7.8 million.

	•		Our International Mills segment showed a 66% increase in net sales and a $47.0 million decrease in adjusted operating loss as compared to the second quarter of 2010 primarily from strong results from our Polish mill offset by continuing losses from our mill in Croatia.

	•		Our International Marketing and Distribution segment continues its trend of positive results and reported an 18% increase in net sales and a $1.3 million increase in adjusted operating profit as compared to the second quarter of 2010.

	•		We recorded consolidated pre-tax LIFO expense of $55.7 million for the second quarter of 2011 compared to pre-tax LIFO expense of $7.4 million for the second quarter of 2010.

SEGMENT OPERATING DATA

Unless otherwise indicated, all dollar amounts below are calculated before income taxes. Financial results for our reportable segments are consistent with the basis and manner in which we internally disaggregate financial information for making operating decisions. See Note 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 profit (loss) before income taxes and financing costs. The following tables show net sales and adjusted operating profit (loss) by business segment:


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands)	2011			2010			2011			2010
Net sales:
Americas Recycling	$	450,562		$	290,609		$	826,357		$	556,137
Americas Mills		477,921			333,823			913,318			641,358
Americas Fabrication		251,970			232,288			539,723			494,761
International Mills		221,355			133,261			454,151			316,530
International Marketing and Distribution		622,675			529,211			1,268,581			1,102,297
Corporate		5,409			2,324			11,667			5,883
Eliminations		(238,126	)		(199,073	)		(439,551	)		(392,265	)

	$	1,791,766		$	1,322,443		$	3,574,246		$	2,724,701


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands)	2011			2010			2011			2010
Adjusted operating profit (loss):
Americas Recycling	$	10,865		$	(6,834	)	$	19,057		$	(8,044	)
Americas Mills		10,945			(17,860	)		45,088			(17,879	)
Americas Fabrication		(49,566	)		(57,317	)		(71,574	)		(66,233	)
International Mills		(7,378	)		(54,396	)		(15,044	)		(73,488	)
International Marketing and Distribution		12,372			11,079			36,610			31,217
Corporate		(16,468	)		(18,960	)		(27,071	)		(39,164	)
Eliminations		(232	)		6,295			71			10,961
Discontinued Operations		(18	)		(62,353	)		650			(66,508	)

LIFO Impact on Adjusted Operating Profit (Loss) LIFO is an inventory costing method that assumes the most recent inventory purchases or goods manufactured are sold first. This results in current sales prices offset against current inventory costs. In periods of rising prices it has the effect of eliminating inflationary profits from operations. In periods of declining prices it has the effect of eliminating deflationary losses from operations. In either case the goal is to reflect economic profit. The table below reflects LIFO income or (expense) representing decreases or (increases) in the LIFO inventory reserve. International Mills is not included in this table as it uses FIFO valuation exclusively for its inventory:


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands)	2011			2010			2011			2010
Americas Recycling	$	(6,865	)	$	(6,686	)	$	(9,114	)	$	(6,704	)
Americas Mills		(39,712	)		(13,903	)		(51,795	)		(16,888	)
Americas Fabrication		(7,645	)		(5,659	)		(1,484	)		5,647
International Marketing and Distribution		(1,534	)		21,209			577			25,859
Discontinued Operations		56			(2,410	)		447			1,906

Consolidated pre-tax LIFO income (expense)	$	(55,700	)	$	(7,449	)	$	(61,369	)	$	9,820

Americas Recycling During the second quarter of 2011, this segment reported an increase in net sales of 55% and an improvement in operating results of $17.7 million to achieve adjusted operating profit of $10.9 million. The improvement in adjusted operating profit is primarily from increased demand and higher trending prices during the quarter. Ferrous pricing was stronger due to increased export demand, lower seasonal flows, stable U.S. mill operating rates and low user inventories. Nonferrous pricing continued to be driven by export demand, with copper prices hitting all-time highs and strong aluminum prices. We exported 5% of our ferrous scrap tonnage and 38% of our nonferrous scrap tonnage during the quarter. LIFO expense of $6.9 million in the second quarter of 2011 was consistent with the amount recorded in the second quarter of 2010.

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


	Three Months Ended									Six Months Ended
	February 28,				Increase					February 28,				Increase
	2011		2010		Amount		%			2011		2010		Amount		%
Average ferrous sales price	$	352	$	256	$	96		38	%	$	318	$	235	$	83		35	%
Average nonferrous sales price	$	3,385	$	2,634	$	751		29	%	$	3,167	$	2,494	$	673		27	%
Ferrous tons shipped		509		412		97		24	%		1,004		849		155		18	%
Nonferrous tons shipped		64		54		10		19	%		127		112		15		13	%

Americas Mills We include our five domestic steel mills, including the scrap locations which directly support the steel mills, and our copper tube minimill in our Americas Mills segment.

Within the segment, adjusted operating profit for our five domestic steel mills was $6.9 million for the second quarter of 2011 compared to an adjusted operating loss of $18.5 million from the prior year’s second quarter. The positive results for the second quarter of 2011 were after this segment absorbed LIFO expense of $38.5 million as compared to LIFO expense of $9.3 million in the second quarter of 2010. Adjusted operating results were driven by margin expansion as selling prices remained ahead of scrap price

increases and higher shipments, which were partially attributable to customers buying in anticipation of price increases. Commercial construction remains weak and needs a rebound from the residential construction market. Demand in the nonresidential construction market remains in infrastructure, health care and education. Our mills ran at 73% of capacity in the second quarter of 2011, an increase from the 58% utilization in the second quarter of 2010. Higher production volumes as well as price increases in alloy rates resulted in an overall increase of $7.0 million in electrode, alloys and energy costs for the second quarter in 2011 as compared to the same period in the prior year. Shipments included 98 thousand tons of billets in the second quarter of 2011 as compared to 101 thousand tons of billets in the second quarter of the prior year.

The table below reflects steel and ferrous scrap prices per ton:


	Three Months Ended									Six Months Ended
	February 28,				Increase					February 28,				Increase
	2011		2010		Amount		%			2011		2010		Amount		%
Average mill selling price (finished goods)*	$	689	$	558	$	131		23	%	$	659	$	555	$	104		19	%
Average mill selling price (total sales)*		661		526		135		26	%		633		516		117		23	%
Average cost of ferrous scrap consumed		372		277		95		34	%		343		271		72		27	%
Average FIFO metal margin		289		249		40		16	%		290		245		45		18	%
Average ferrous scrap purchase price		339		251		88		35	%		312		233		79		34	%


*		Prior year domestic selling prices revised to eliminate net freight costs.

The table below reflects our domestic steel mills’ operating statistics (short tons in thousands):


	Three Months Ended									Six Months Ended
	February 28,				Increase					February 28,				Increase
	2011		2010		Amount		%			2011		2010		Amount		%
Tons melted		598		486		112		23	%		1,187		965		222		23	%
Tons rolled		514		399		115		29	%		1,020		754		266		35	%
Tons shipped		606		521		85		16	%		1,178		1,019		159		16	%

Our copper tube minimill’s adjusted operating profit for the second quarter of 2011 increased $3.4 million to $4.0 million compared to the second quarter of 2010 primarily due to a decrease in LIFO expense of $3.4 million.

The table below reflects our copper tube minimill’s operating statistics:


	Three Months Ended										Six Months Ended
	February 28,				Increase (Decrease)						February 28,				Increase (Decrease)
(pounds in millions)	2011		2010		Amount			%			2011		2010		Amount			%
Pounds shipped		9.7		9.7		—			—			20.3		19.6		0.7			4	%
Pounds produced		8.5		10.3		(1.8	)		(17	%)		18.2		19.0		(0.8	)		(4	%)

Americas Fabrication During the second quarter of 2011, this segment reported an increase in net sales of 8% and an improvement in operating results of $7.8 million to record an adjusted operating loss of $49.6 million. This segment continues to face unfavorable market conditions for downstream operations as finished goods price increases led to margin compression on contracts in backlog. The upward trend in finished goods pricing had a negative impact on results but is expected to lay a foundation for profitability as prices stabilize in the future. Additionally, backlogs are building at higher prices, allowing our integrated supply chain in recycling and mill operations to benefit. Infrastructure and public works demand continues while commercial work remains weak, especially in the West. Results were also negatively impacted by an increase in LIFO expense of $2.0 million in the second quarter of 2011 as compared to 2010. The composite average fabrication selling price was $775 per ton, 7% higher than last year’s second quarter price.

The tables below show our average fabrication selling prices per short ton and total fabrication plant shipments:


	Three Months Ended									Six Months Ended
	February 28,				Increase					February 28,				Increase
Average selling price*	2011		2010		Amount		%			2011		2010		Amount		%
Rebar	$	723	$	667	$	56		8	%	$	726	$	714	$	12		2	%
Structural		1,995		1,861		134		7	%		1,881		1,843		38		2	%
Post		896		868		28		3	%		901		869		32		4	%

* Excludes stock and buyout sales.

	Three Months Ended									Six Months Ended
	February 28,				Increase					February 28,				Increase
Tons shipped (in thousands)	2011		2010		Amount		%			2011		2010		Amount		%
Rebar		177		165		12		7	%		390		361		29		8	%
Structural		13		11		2		18	%		27		23		4		17	%
Post		26		22		4		18	%		46		42		4		10	%

International Mills CMC Zawiercie (“CMCZ”) had adjusted operating profit of $4.0 million in the second quarter of 2011 as compared to an adjusted operating loss of $38.4 million in the second quarter of last year. The improvement in adjusted operating results was driven by higher prices and margin expansion as the prior year results were significantly impacted by recessionary pricing resulting in the lowest metal margins since the acquisition of the mill. Prices were also positively impacted from a better product mix from our new rolling mills. The Polish economy remained vibrant resulting in strong markets in infrastructure, engineering applications and consumer goods. Shipments included 45 thousand tons of billets in the second quarter of 2011 as compared to 59 thousand tons of billets in the second quarter of the prior year.

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


	Three Months Ended												Six Months Ended
	February 28,						Increase						February 28,						Increase
	2011			2010			Amount			%			2011			2010			Amount			%
Tons melted		359			293			66			23	%		720			692			28			4	%
Tons rolled		285			236			49			21	%		592			502			90			18	%
Tons shipped		314			282			32			11	%		670			637			33			5	%
Average mill selling price (total sales)		1,768	PLN		1,186	PLN		582	PLN		49	%		1,706	PLN		1,205	PLN		501	PLN		42	%
Average ferrous scrap production cost		1,131	PLN		778	PLN		353	PLN		45	%		1,058	PLN		782	PLN		276	PLN		35	%
Average metal margin		637	PLN		408	PLN		229	PLN		56	%		648	PLN		423	PLN		225	PLN		53	%
Average ferrous scrap purchase price		958	PLN		638	PLN		320	PLN		50	%		884	PLN		635	PLN		249	PLN		39	%
Average mill selling price (total sales)	$	603		$	413		$	190			46	%	$	583		$	423		$	160			38	%
Average ferrous scrap production cost	$	386		$	271		$	115			42	%	$	362		$	274		$	88			32	%
Average metal margin	$	217		$	142		$	75			53	%	$	221		$	149		$	72			48	%
Average ferrous scrap purchase price	$	328		$	222		$	106			48	%	$	303		$	223		$	80			36	%


PLN		— Polish zlotys

CMC Sisak (“CMCS”) reported an adjusted operating loss of $11.3 million for the second quarter of 2011 as compared to an adjusted operating loss of $16.0 million in the second quarter of 2010. During the quarter, technical teams began to make progress in several essential operating areas. The operations for the second quarter of 2011 were negatively impacted by scheduled downtime for maintenance. The initial progress of CMCS is being achieved in quality of personnel and training, efficiency in processes and opening of markets to the sale of blooms, which is expected to be reflected in future results. CMCS melted 34 thousand tons, rolled 18 thousand tons and sold 19 thousand tons during the second quarter as compared to 19 thousand tons melted, 14 thousand tons rolled and 16 thousand tons sold during the prior year’s second quarter.

Our fabrication operations in Poland and Germany were breakeven during the second quarter of 2011 compared to an adjusted operating loss of $4.7 million in the second quarter of 2010. These results are included in the overall results of CMCZ discussed above.

International Marketing and Distribution This segment reported its sixth consecutive profitable quarter and reported an increase in sales of 18% and an increase in adjusted operating profit of 12% to $12.4 million as compared to the second quarter of 2011. These results were achieved even though this segment recorded an increase in LIFO expense of $22.7 million in the second quarter of 2011 as compared to the second quarter of 2010. Each major geographic operation was profitable, with the Asian operations performing particularly well and a strong U.S. customer sentiment for raw material consumption. During the quarter, the U.S. steel import business benefitted from higher value products. The Australian operations were marginally profitable given the weakened state of the economy and recent weather devastations.

Corporate Our corporate expenses decreased $2.5 million and $12.1 million for the three and six months ended February 28, 2011 compared to the same periods from the prior year primarily due to cost containment initiatives and lower information technology costs.

Consolidated Data The LIFO method of inventory valuation increased our net loss from continuing operations by approximately $36 million and approximately $3 million for the second quarter of 2011 and 2010, respectively. The LIFO method of inventory valuation increased our net loss from continuing operations by approximately $40 million for the six months ended February 28, 2011 as compared to decreasing our net loss by approximately $5 million for the same period in the prior year. Our overall selling, general and administrative (“SG&A”) expenses decreased by $25.9 million, or 18%, and $35.5 million, or 13%, for the three and six months ended February 28, 2011, respectively, as compared to the same periods last year. SG&A expenses primarily declined from our cost containment initiatives and lower information technology costs.

Our interest expense decreased by $2.0 million and $3.1 million for the three and six months ended February 28, 2011, respectively, as compared to the same periods from the prior year. The decrease primarily relates to the favorable impact of interest rate swaps transactions of $3.5 million and $6.8 million for the three and six months ended February 28, 2011, respectively, offset by less capitalized interest as a result of completed capital projects during 2010.

Our effective tax rate from continuing operations for the three and six months ended February 28, 2011 was 21.4% and 11.2% as compared to 15.0% and 19.6% in the same periods of the prior year. Our effective tax rate for the three and six months ended February 28, 2011 varies from our statutory rate primarily from losses in Croatia not being tax benefitted as we may not be able to utilize them in the allowed carryforward period.

Discontinued Operations Our division classified as a discontinued operation was breakeven for the second quarter of 2011 as compared to an adjusted operating loss of $62.4 million in the second quarter of 2010. During the second quarter of 2010, we decided to exit the joist and deck business which resulted in $45.4 million in closure cost including impairment of fixed assets and intangibles, severance costs and inventory valuation charges. The results for the second quarter of 2011 include carrying costs as all locations have either been sold or ceased operations.

OUTLOOK

For the third quarter of 2011, there appears to be optimism in the world metal market. As the spring construction season begins, we expect pricing to shift from cost to demand driven. Effective sales prices should rise as previously implemented price increases take effect; with scrap pricing stabilizing, metal margins should improve. In the current environment, we expect our Americas Recycling and Mills segments to improve. We expect our Americas Fabrication segment to get some relief, but not enough to achieve profitability. We expect that sustainable growth in Northern and Central Europe, particularly Germany, will benefit our Polish operations and drive higher earnings. As management is implementing a revised operating strategy in Croatia, we expect losses at our Croatian operations to be reduced as margins improve and cost reduction efforts take effect. Our operating plan, based on assumptions we believe to be reasonable given the current economic environment, does not require any impairment charges. However, management will continuously assess performance against plan for any possible indication of impairment. We expect our raw materials operations in the U.S., Asia and Europe to maintain profitability. Absent LIFO considerations, we anticipate earnings per share between $0.15 and $0.25 for the third quarter of 2011.

LIQUIDITY AND CAPITAL RESOURCES

See Note 8 — 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 potential buyers of our commercial paper or other of the traditional sources supplying our short term borrowing requirements refuse to honor their contractual commitments, cease lending or declare bankruptcy. 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.

The table below reflects our sources, facilities and availability of liquidity and capital resources as of February 28, 2011 (dollars in thousands):


	Total Facility			Availability
Cash and cash equivalents	$	265,021		$	N/A
Commercial paper program*		400,000			390,000
International accounts receivable sales facilities		194,838			55,815
Bank credit facilities — uncommitted		811,411			452,980
Notes due from 2013 to 2018		1,100,000				**
CMCZ term note		62,803			—
CMCS term facility		55,214			34,509
Trade financing arrangements			**	As required
Equipment notes		6,342				**


*		The commercial paper program is supported by our $400 million unsecured revolving credit agreement. The availability under the revolving credit agreement is reduced by $10.0 million of commercial paper outstanding as of February 28, 2011.

**		With our investment grade credit ratings, we believe we have access to additional financing and refinancing, if needed.

We utilize uncommitted credit facilities to meet short-term working capital needs. Our uncommitted credit facilities primarily support import letters of credit (including accounts payable settled under bankers’ acceptances), foreign exchange transactions and short term advances.

Our 5.625% $200 million notes due November 2013, 6.50% $400 million notes due July 2017 and our 7.35% $500 million notes due August 2018 require interest only payments until maturity. Our CMCZ note requires quarterly interest and principal payments and our CMCS facility requires quarterly interest and principal payments beginning in July 2011. We expect cash from operations to be sufficient to meet all interest and principal payments due within the next twelve months, and we believe we will be able to get additional financing or refinance these notes when they mature.

Certain of our financing agreements include various financial covenants. The revolving credit facility required us to maintain a minimum interest coverage ratio (adjusted EBITDA to interest expense) of not less than 2.50 to 1.00 for the twelve month cumulative period ended February 28, 2011 and for each fiscal quarter on a rolling twelve month cumulative period thereafter. At February 28, 2011, our interest coverage ratio was 2.65 to 1.00. The debt to capitalization ratio covenant under the agreement requires us to maintain a ratio not greater than 0.60 to 1.00. At February 28, 2011, our debt to capitalization ratio was 0.52 to 1.00. Current market conditions, including volatility of metal prices, LIFO adjustments, mark to market adjustments on inventories, reserves for future job losses, the level of allowance for doubtful accounts, the amount of interest capitalized on capital projects and the effect of interest rate changes on our interest rate swaps could impact our ability to meet the interest coverage ratio for the third quarter of fiscal 2011. The revolving credit facility is used as an alternative source of liquidity. Our public debt does not contain these covenants.

The CMCZ term note contains certain financial covenants. The agreement requires a debt to equity ratio of not greater than 0.80 to 1.00, a tangible net worth to exceed PLN 600 million ($209.3 million) and a debt to EBITDA ratio not greater than 3.50 to 1.00. At February 28, 2011, CMCZ was in compliance with these covenants with a debt to equity ratio at 0.69 to 1.00, tangible net worth of PLN 674 million ($235.2 million) and a debt to EBITDA ratio at 2.95 to 1.00. Additionally, the agreement requires an interest coverage ratio of not less than 1.20 to 1.00. At February 28, 2011, CMCZ was not in compliance with this covenant which resulted in a guarantee by the Company continuing to be 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 this financial covenant for two consecutive quarters.

We regularly maintain a substantial amount of accounts receivable. We actively monitor our accounts receivable and record allowances as soon as we believe they are uncollectible based on current market conditions and customers’ financial condition. Continued pressure on the liquidity of our customers could result in additional reserves as we make our assessments in the future. We use credit insurance both in the U.S. and internationally to mitigate the risk of customer insolvency. We estimate the amount of credit insured receivables (and those covered by export letters of credit) was approximately 67% of total receivables at February 28, 2011.

For added flexibility, we may sell certain accounts receivable internationally. Our domestic securitization program expired on January 31, 2011. On April 5, 2011, the Company entered into a $100 million accounts receivable sale agreement. See Note 17, Subsequent Events, to the consolidated financial statements for additional information.

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 nonferrous metals commodity prices.

During the six months ended February 28, 2011, we used $15.4 million of net cash flows from operating activities as compared to generating $13.5 million in the first six months of 2010. We generated less cash in fiscal 2011 than the same period in 2010 from fluctuations in working capital offset by a reduction in net loss. Significant fluctuations in working capital were as follows:

	•		Accounts receivable — accounts receivable increased for the first six months of 2011 as sales and prices continued to improve as compared to the same period in the prior year;

	•		Inventory — more cash was used in the first six months of 2011 as demand increased and we increased inventories as compared to the same period in 2010;

	•		Other Assets — more cash was generated in the first six months of 2011 due to net income tax refunds received of approximately $76 million consisting primarily of federal tax refunds.

During the six months ended February 28, 2011, we generated $30.6 million of net cash flows from investing activities as compared to using $116.5 million during the same period in the prior year. We invested $23.1 million in property, plant and equipment during 2011, a decrease of $64.2 million over 2010. Additionally, we had proceeds from the sale of property, plant and equipment and other assets of $51.9 million, an increase of $51.4 million over 2010, primarily related to the sale of certain assets of our joist business and forms from our heavy forms rental business.

We expect our total capital budget for fiscal 2011 to be approximately $125 million. We continually assess our capital spending and reevaluate our requirements based on current and expected results.

During the six months ended February 28, 2011, we used $152.5 million of net cash flows from financing activities as compared to $5.2 million during the six months ended February 28, 2010. The increase in cash used was primarily due to decreased net borrowings on short-term debt of $81.9 million and decreased documentary letters of credit of $40.5 million in the first six months of 2011. Our cash dividends have remained consistent at approximately $27 million for both periods.

Our contractual obligations for the next twelve months of approximately $905 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 February 28, 2011 (dollars in thousands):


	Payments Due By Period*
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Contractual obligations:
Long-term debt(1)	$	1,196,092	$	36,569	$	49,427	$	207,593	$	902,503
Notes payable		7,110		7,110		—		—		—
Interest(2)		397,092		64,998		122,065		106,920		103,109
Commercial paper		10,000		10,000		—		—		—
Operating leases(3)		142,196		40,300		54,706		28,394		18,796
Purchase obligations(4)		888,781		746,182		89,867		42,530		10,202

Total contractual cash obligations	$	2,641,271	$	905,159	$	316,065	$	385,437	$	1,034,610


*		We have not discounted the cash obligations in this table.

(1)		Total amounts are included in the February 28, 2011 consolidated balance sheet. See Note 8, 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 February 28, 2011. Also, includes the effect of our interest rate swaps based on the LIBOR forward rate at February 28, 2011.

(3)		Includes minimum lease payment obligations for non-cancelable equipment and real estate leases in effect as of February 28, 2011.

(4)		Approximately 74% 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 February 28, 2011, we had committed $34.3 million under these arrangements, of which $29.3 million is cash collateralized. All of the commitments expire within one year.

CONTINGENCIES

See Note 14 — Commitments and Contingencies, to the consolidated financial statements.

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 potential 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 operations for a particular quarter.

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.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (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 (loss), 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,” “estimates,” “intends,” “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;

•		continued debt problems within the eurozone and other foreign zones;

•		customer non-compliance with contracts;

•		construction activity, including residential, commercial and industrial;

•		decisions by governments affecting the level of steel imports, including tariffs and duties;

•		litigation claims and settlements;

•		difficulties or delays in the execution of construction contracts resulting in cost overruns or contract disputes;

•		metals pricing over which we exert little influence;

•		increased capacity and product availability from competing steel minimills and other steel suppliers, including import quantities and pricing;

•		execution of cost minimization strategies;

•		ability to retain key executives;

•		court decisions and regulatory rulings;

•		industry consolidation or changes in production capacity or utilization;

•		global factors, including political and military uncertainties and acts of nature;

•		currency fluctuations;

•		interest rate changes;

•		availability and pricing of raw materials, including scrap metal and energy;

•		insurance and supply prices;

•		passage of new, or interpretation of existing, environmental laws and regulations;

•		severe weather, especially in Poland; and

•		the pace of overall economic activity, particularly in China.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required hereunder for the Company is not materially different from the information set forth in Item 7a. Quantitative and Qualitative Disclosures about Market Risk included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2010, filed with the SEC and is, therefore, not presented herein.

Additionally, see Note 9 — Derivatives and Risk Management, to the consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of 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 quarterly report, and they have concluded that as of that date, our disclosure controls and procedures were effective.

No change 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 financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to the information incorporated by reference from Item 3. Legal Proceedings in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended August 31, 2010.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended August 31, 2010.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


						Total
						Number of		Maximum
						Shares		Number of
						Purchased		Shares that
						As Part of		May Yet Be
	Total					Publicly		Purchased
	Number of			Average		Announced		Under the
	Shares			Price Paid		Plans or		Plans or
	Purchased			Per Share		Programs		Programs
As of November 30, 2010									8,259,647	(1)
December 1 — December 31, 2010		13,279	(2)		16.41		—		8,259,647	(1)
January 1 — January 31, 2011		29,392	(2)		16.15		—		8,259,647	(1)
February 1 — February 28, 2011		3,672	(2)		16.96		—		8,259,647	(1)
As of February 28, 2011		46,343	(2)		16.29		—		8,259,647	(1)


(1)		Shares available to be purchased under the Company’s Share Repurchase Program publicly announced October 21, 2008.

(2)		Shares tendered to the Company by employee stock option holders in payment of the option purchase price due upon exercise.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. (RESERVED)

ITEM 5. OTHER INFORMATION

Not Applicable.

ITEM 6. EXHIBITS

Exhibits required by Item 601 of Regulation S-K:


10.1		Form of Long-Term Cash and Equity Award Agreement (filed herewith).

10.2		Form of Long-Term Equity Award Agreement (filed herewith).

10.3		Receivables Sale Agreement, by and between Commercial Metals Company and several of its subsidiaries and CMC Receivables, Inc. (a special purpose wholly-owned subsidiary of Commercial Metals Company), dated as of April 5, 2011 (filed herewith).

10.4		Receivables Purchase Agreement, by and among Commercial Metals Company, CMC Receivables, Inc. (a special purpose wholly-owned subsidiary of Commercial Metals Company), certain purchasers and Wells Fargo Bank, N.A., as administrative agent for the purchasers, dated as of April 5, 2011 (filed herewith).

10.5		Performance Undertaking executed by Commercial Metals Company in favor of CMC Receivables, Inc. (a special purpose wholly-owned subsidiary of Commercial Metals Company), dated as of April 5, 2011 (filed herewith).

31.1		Certification of Murray R. McClean, Chairman of the Board and Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 to the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of William B. Larson, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Murray R. McClean, Chairman of the Board 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).

32.2		Certification of William B. Larson, Senior 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).

101*		Financial statements from the quarterly report on Form 10-Q of Commercial Metals Company for the quarter ended February 28, 2011, filed on April 8, 2011, formatted in XBRL: (i) the Consolidated Balance Sheets (Unaudited), (ii) the Consolidated Statements of Operations (Unaudited), (iii) the Consolidated Statements of Cash Flows (Unaudited), (iv) the Consolidated Statements of Stockholders’ Equity (Unaudited) and (v) the Notes to Consolidated Financial Statements tagged as blocks of text (submitted electronically herewith).


*		In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	COMMERCIAL METALS COMPANY
April 8, 2011	/s/ William B. Larson
	William B. Larson
	Senior Vice President & Chief Financial Officer


April 8, 2011	/s/ Leon K. Rusch
	Leon K. Rusch
	Vice President & Controller

INDEX TO EXHIBITS


Exhibit No.		Description of Exhibit

10.1		Form of Long-Term Cash and Equity Award Agreement (filed herewith).

10.2		Form of Long-Term Equity Award Agreement (filed herewith).

10.3		Receivables Sale Agreement, by and between Commercial Metals Company and several of its subsidiaries and CMC Receivables, Inc. (a special purpose wholly-owned subsidiary of Commercial Metals Company), dated as of April 5, 2011 (filed herewith).

10.4		Receivables Purchase Agreement, by and among Commercial Metals Company, CMC Receivables, Inc. (a special purpose wholly-owned subsidiary of Commercial Metals Company), certain purchasers and Wells Fargo Bank, N.A., as administrative agent for the purchasers, dated as of April 5, 2011 (filed herewith).

10.5		Performance Undertaking executed by Commercial Metals Company in favor of CMC Receivables, Inc. (a special purpose wholly-owned subsidiary of Commercial Metals Company), dated as of April 5, 2011 (filed herewith).

31.1		Certification of Murray R. McClean, Chairman of the Board and Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 to the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of William B. Larson, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Murray R. McClean, Chairman of the Board 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).

32.2		Certification of William B. Larson, Senior 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).

101*		Financial statements from the quarterly report on Form 10-Q of Commercial Metals Company for the quarter ended February 28, 2011, filed on April 8, 2011, formatted in XBRL: (i) the Consolidated Balance Sheets (Unaudited), (ii) the Consolidated Statements of Operations (Unaudited), (iii) the Consolidated Statements of Cash Flows (Unaudited), (iv) the Consolidated Statements of Stockholders’ Equity (Unaudited) and (v) the Notes to Consolidated Financial Statements tagged as blocks of text (submitted electronically herewith).


*		In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Exhibit 10.1

COMMERCIAL METALS COMPANY

LONG-TERM CASH AND EQUITY AWARD AGREEMENT

_______________________
(the “ Participant ”)

has been granted a Restricted Stock Unit Award and a Performance Stock Unit Award, both of which are described in this Award Agreement (the “ Agreement ”) in accordance with Article 6 of the Commercial Metals Company (the “ Company ”) 2006 Long-Term Equity Incentive Plan (the “ Plan ”). The “ Date of Grant ” is January 18, 2011. The Performance Period is three years, being calendar years 2011 through 2013 (the “Performance Period” ).

This Agreement is subject to the terms of the Plan, and the terms of the Plan shall control in the event any provision of this Agreement is inconsistent with the provisions of the Plan. The capitalized terms used but not defined in this Agreement that are defined in the Plan shall have the meanings assigned to them in the Plan. The RSU Award (as defined in Section 1 below) and the PSU Award (as defined in Section 2 below), together, are referred to herein as the “ Awards .”

1. Restricted Stock Unit Award . The number of shares of Common Stock that may be delivered is __________ (the “ RSU Award ”).

a. Vesting; Timing of Delivery of Shares .

(i) Subject to special vesting and forfeiture rules in this Agreement, provided the Participant is employed by or providing services to the Company or a Subsidiary on the applicable vesting date, the RSU Award shall vest in the form of shares of Company Common Stock and become payable as follows:

(A) First anniversary of the Date of Grant: One-Third of the total RSU Award.

(B) Second anniversary of the Date of Grant: One-Third of the total RSU Award.

Each of the periods described in Section 1.a.(i)(A), (B), and (C) above is a “ Vesting Year .”

(ii) Upon (A) the Participant’s death; (B) the Participant’s Termination of Service as a result of Total and Permanent Disability; or (C) the Participant’s Qualifying Retirement, a pro rata portion of the unvested RSU Award shall automatically become vested and payable equal to the portion of the RSU Award that would have become vested pursuant to Section 1.a.(i) at the end of the then-current Vesting Year multiplied by a fraction, the numerator of which is the number of days during the then-current Vesting Year prior to the date of such event, and the denominator of which is 365.

(iii) Notwithstanding Section 1.a.(i) , 100% of the as-yet unvested RSU Award shall automatically become fully vested and payable upon the occurrence of a Change in Control.

(iv) In the event of vesting of an RSU Award pursuant to reaching one of the following: a Vesting Year, the Participant’s death, or the occurrence of a Change in Control, the Company shall deliver to the Participant (or the Participant’s personal representative) the number of shares of Common Stock equal to the number of units of the RSU Award which have become vested either ratably, or due to death or a Change in Control upon the earliest of: (A) the date of a Vesting Year has been reached, or (B) as soon as practical after (i) the Participant’s death or (ii) when the Change in Control occurs, but in no event later than 60 days following such date.

(v) Subject to Section 15.b. , in the event of vesting of the RSU Award pursuant to Section 1.a.(ii)(B) (Termination of Service due to Disability) or Section 1.a.(ii)(C) (Qualifying Retirement), the Company shall deliver to the Participant (or the Participant’s personal representative) a number of shares of Common Stock equal to the appropriate pro rata vested RSU Award credited to the Participant, upon, or as soon as practical following, but in no event later than 60 days after the occurrence of either accelerating event.

b. Forfeiture of RSU Award . Any portion of the RSU Award that does not become vested and payable in shares of Common Stock in accordance with this Section 1 shall be forfeited on the date of the Participant’s Termination of Service.

2. Performance Cash and Equity Award . This Performance Stock Unit Award is composed of (i) a cash award based on achievement of the Target level of the performance goals and objectives set forth in this Agreement, equal to the value of _____________ Restricted Stock Units based on the closing price per share of Common Stock on the day of vesting (as defined in Section 7.6 of the Plan), and (ii) an award of shares of Common Stock based on achievement of the Target level of the performance goals and objectives set forth in this Agreement, measured by _____________ Restricted Stock Units. Together, the total of ______________ Restricted Stock Units awarded in this Section 2 are referred to as the “ PSU Award. ”

a. Vesting; Timing of Delivery of Shares .

(i) Performance Vesting . Subject to special vesting and forfeiture rules in this Agreement, the PSU Award shall vest upon achievement of the requirements/targets during the Performance Period as described on the Schedule attached hereto, which is by this reference made a part hereof.

Notwithstanding the above, the Committee may reduce the PSU Award, in its sole discretion. Further, if at vesting the Company ranks below the 40 ^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 on the Principal Market for each Trading Day for the Performance Period, then the Committee shall consider whether to reduce the PSU Award and/or modify the form in which any vested units are paid (i.e., cash vs. shares of Common Stock).

In the event of vesting of the PSU Award pursuant to this Section 2.a.(i) , the Company shall deliver to the Participant (or the Participant’s personal representative) as

soon as practical after such vesting, but in no event later than 60 days following such date:

	(x)		cash in an amount equal to the value of the number of shares of Common Stock equal to the 50% of the aggregate number of vested units in the PSU Award credited to the Participant, with such value based on the closing price of Company Common Stock on the last day of the Performance Period, and

	(y)		the number of shares of Common Stock equal to the 50% of the aggregate number of vested PSU Award units credited to the Participant.

(ii) Accelerated Vesting Upon Death, Disability or Qualifying Retirement . Notwithstanding Section 2.a.(i) , in the event of the Participant’s (A) death; (B) Termination of Service as a result of Total and Permanent Disability; or (C) Qualifying Retirement, the PSU Award shall vest, with the vested value to be determined at the end of the Performance Period by multiplying the total PSU Award that would be vested based on Section 2.a.(i) above, by a fraction, the numerator of which is the number of days from the Date of Grant to the date of such event, and the denominator of which is the number of days in the full Performance Period. Such pro rata vested PSU Award shall be payable not later than 60 days following the end of the Performance Period. Notwithstanding the foregoing paragraph, the Compensation Committee shall have the sole authority to determine whether a retirement is a Qualified Retirement for the purposes of triggering an acceleration of the vesting of a PSU Award.

(iii) Accelerated Vesting Upon Change in Control . Notwithstanding Section 2.a.(i) , the PSU Award shall automatically and immediately become vested as of the occurrence of a Change in Control in accordance with this paragraph. The number of units in the PSU Award vesting as the result of a Change in Control shall be equal to the number determined in accordance with the attached Schedule A, assuming achievement of the performance goals at the Target level through the end of the Performance Period. The vested PSU Award shall be payable not later than 60 days following the effective date of the Change in Control.

(iv) Delivery of Cash After Vesting Due to Death, Disability or Qualifying Retirement . In the event of vesting of the PSU Award pursuant to Section 2.a.(ii) , the Company shall deliver to the Participant (or the Participant’s personal representative): cash in an amount equal to the value of the number of shares of Common Stock equal to the aggregate number of units in the vested PSU Award, with such value based on the closing price of Company Common Stock on the last day of the Performance Period. Such delivery shall occur not later than 60 days following the last day of the Performance Period.

(v) Delivery of Cash and Shares After Vesting Due to Change in Control . Subject to Section 15.b. , in the event of vesting of PSU Award pursuant Section 2.a.(iii) , the Company shall deliver to the Participant:

(x)

cash in an amount equal to the value of the number of shares of Common Stock equal to the 50% of the aggregate number of vested units in the Participant’s PSU Award, with such value

			based on the closing price of Company Common Stock on the effective date of the Change in Control; and

	(y)		the number of shares of Common Stock equal to the 50% of the aggregate number of vested units in the Participant’s PSU Award.

Such delivery shall occur as soon as practical following the occurrence of a Change in Control, but in no event later than 60 days after such date.

b. Forfeiture of PSU Award . Any portion of the PSU Award that does not become vested and payable in shares of Common Stock in accordance with Section 2 shall be forfeited on the earlier of the date of the Participant’s Termination of Service or January 18, 2014.

3. Definitions . For purposes of this Agreement, the following terms shall have the meanings set forth below:

“EBITDA” means, for the Company or any Subsidiary, the net earnings of that entity before deductions by the entity for interest, income taxes, depreciation and amortization expenses.

“ Peer Group ” means the companies set forth in the Company’s proxy statement filed in December 2010. If between the Date of Grant and December 31, 2013, any member of the Peer Group ceases to be a public company with common stock listed for trading, then such member shall be removed from the Peer Group for any calculations related to this Agreement. If 25% or more of the companies that constitute the original Peer Group are removed from the Peer Group under the preceding sentence, the Committee may add additional companies to the Peer Group; but the Peer Group shall never consist of more than eleven companies.

“ Principal Market ” means the New York Stock Exchange, or if the Common Stock is not traded on the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the NYSE AMEX or any successor exchanges.

“ Qualifying Retirement ” means that the Committee, in its sole discretion, determines that the sole reason for the Participant’s Termination of Service is retirement. The following thresholds shall act as triggers for an analysis by the Committee of whether a retirement event is a Qualified Retirement: (x) a Retirement (as defined in the Plan) or (y) a qualified retirement under the terms of this Agreement, as follows: (A) Termination of Service as a result of retirement on or after attaining age sixty-two (62); (B) Termination of Service as a result of retirement following the attainment of age fifty-five (55) and ten (10) years of employment with the Company or any Subsidiary; or (C) Termination of Service as a result of retirement following the attainment of age fifty (50) and fifteen (15) years of employment with the Company or any Subsidiary, or for other reasons as determined by the Compensation Committee.

“Return on Invested Capital” means FIFO Net Earnings before interest expense divided by the sum of commercial paper, notes payable (excluding any parent company guarantee), current maturities of long-term debt and stockholders equity. “FIFO Net Earnings” means net earnings calculated using the first in, first out inventory costing principle for all inventories.

“ Total Stockholder Return ” is a per share price at the beginning of the period compared to a per share price at the end of the period with cash dividends assumed to purchase additional fractional shares at the closing price as of the ex-dividend date.

“ Trading Day ” means any day on which the Common Stock is traded on the Principal Market.

4. Restrictions on Awards and Rights of a Stockholder . The Participant will not be treated as a stockholder with respect to any shares of Common Stock covered by this Agreement until the shares are entered by book entry registration in the Company’s direct registration services or issuance of a certificate or certificates to the Participant for the shares. Article 11 of the Plan shall cover any adjustments for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates. Subject to the provisions of the Plan, until the date shares of Common Stock are delivered to the Participant under the Awards (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge or assign any of the Awards or any shares of Common Stock that may be delivered under the Awards. All of the rights of the Participant in the Awards and the Common Stock issued upon vesting of the Awards are subject to Section 16 of this Agreement.

5. Book Entry or Certificate Issuance of Shares and Legend . All shares of Common Stock delivered shall be represented by, at the option of the Company, either book entry registration in the Company’s direct registration services or by a certificate. If the Common Stock was not issued in a transaction registered under the federal and state securities laws, all shares of Common Stock delivered under the Awards that are issued in certificate form shall bear a restrictive legend and shall be held indefinitely, unless they are subsequently registered under the federal and state securities laws or the Participant obtains an opinion of counsel, satisfactory to the Company, that registration is not required. All shares of Common Stock delivered that are issued in book entry direct registration services form shall be subject to the same restrictions described in a restrictive legend.

6. 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.

7. Investment Representation . Unless the Common Stock is issued to him in a transaction registered under federal and state securities laws, the Participant represents and warrants that all Common Stock which may be acquired hereunder will be acquired by the Participant for investment purposes for his own account and not with any intent for resale or distribution in violation of federal or state securities laws.

8. 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 is familiar with the terms of the Plan, and accepts this Award subject to all the terms of the Plan. The Participant 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.

9. Law Governing; Venue . 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). Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement shall be brought in the courts of the State of Texas, County of Dallas, or, if

it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such proceeding, waives any objection it may now or hereafter have to venue or convenience of forum, agrees that all claims in respect of the proceedings shall be heard and determined only in any such court and agrees not to bring any proceeding arising out of or relating to this Agreement in any other court.

10. Legal Construction . In the event that any term of this Agreement is held by a court to be invalid in any respect, the invalid term shall not affect any other term that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid term had never been contained herein.

11. 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 of this Agreement and constitute the sole agreements between the parties with respect to the subject matter.

12. Parties Bound . The terms 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 set forth in this Agreement.

13. Modification . No change or modification of this Agreement shall be valid unless the change or modification is in writing and signed by the parties. However, the Company may change or modify the terms of this Agreement without the Participant’s consent or signature if the Company determines that such change or modification is necessary to comply with or be exempt from the requirements of Section 409A of the Code. In any event, the Company may amend the Plan or revoke the Awards to the extent permitted by the Plan.

14. Tax Requirements . The Participant should consult immediately with his own tax advisor regarding the tax consequences of this Agreement. The Company (or a Subsidiary that is the Participant’s employer) (for purposes of this Section 14 “ Company ” includes any applicable Subsidiary), shall have the right to deduct from all amounts paid in stock, cash or any other form, any taxes required by law to be withheld in connection with this Award. The Company may also require the Participant receiving shares of Common Stock to pay the Company the amount of any taxes that the Company is required to withhold in connection with this Award. Such payments shall be made when requested by Company and may be required prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made at the election of the Participant (i) by the delivery of cash to the Company in an amount that equals (or exceeds, to the extent necessary to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months, with an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the vesting of this Award, with an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment (the “ Share Retention Method ”); or (iv) any combination of (i), (ii), or (iii). However, if the Participant is subject to Section 16 of the Securities Exchange Act of 1934, his withholding obligation under this Section 14 shall be satisfied by the Share Retention Method, and neither the Company nor the Committee shall have any discretion to permit the satisfaction of such withholding obligation by any other means.

15. Section 409A; Delay of Payment .

a. It is intended that the payments and benefits provided under this Agreement will be exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Agreement shall be interpreted, construed, administered, and governed in a manner that effects such intent, and the Company shall not take any action that would be inconsistent with such intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax upon the Participant under Section 409A of the Code.

b. To the extent (i) any payment to which the Participant becomes entitled under this Agreement, upon the Participant’s Termination of Service constitutes deferred compensation subject to Section 409A of the Code, (ii) the Participant is deemed at the time of such Termination of Service to be a “specified employee” under Section 409A of the Code, (iii) the Company is publicly traded (as defined in Section 409A of the Code), and (iv) such payment is subject to the delay provided for herein, then such payment will not be made or commence until the earlier of (x) the expiration of the six (6) month period measured from the date of the Participant’s Termination of Service; and (y) the date of the Participant’s death following such Termination of Service.

16. Forfeiture or Recovery . Notwithstanding anything to the contrary in the Plan, if the Committee determines, in its sole discretion, that the Participant has engaged in fraud or misconduct that relates to, in whole or in part, the need for a required restatement of the Company’s financial statements filed with the Securities and Exchange Commission, the Committee will review all incentive compensation awarded to or earned by the Participant, including, without limitation, any Award under the Plan, with respect to fiscal periods materially affected by the restatement and may cause to be forfeited any vested or unvested Awards and may recover from the Participant all incentive compensation to the extent that the Committee deems appropriate after taking into account the relevant facts and circumstances. Any recoupment hereunder may be in addition to any other remedies that may be available to the Company under any other agreement or applicable law, including disciplinary action up to and including termination of employment.

* * * * * * * * * * * *

IN WITNESS WHEREOF, this Agreement has been executed by a duly authorized officer of the Company, and the Participant, to evidence his consent and approval of all the terms of this Agreement, has duly executed this Agreement, as of the date specified in Section 1 of this Agreement.


		COMPANY:

		COMMERCIAL METALS COMPANY

		By:

		Name:

		Title:

		PARTICIPANT:



		Signature


		Name:

		Address:

SCHEDULE A
GOALS, LEVELS OF ACHIEVEMENT, AND VESTING

Weighting

Threshold:

Target:

Maximum :

—

ROIC:

—

EBITDA:

—

Achievement of Target performance results in 100% vesting of that Goal; achievement of Threshold performance results in ___% vesting of that Goal; achievement of Maximum performance results in ___% vesting of that Goal. After determination by the Committee of the level of achievement for each Goal, the Committee will determine the percentage of vesting by interpolation (on a straight-line basis) between Threshold and Maximum.

[For example, if the ROIC achievement is _____%, that is half-way between Threshold and Target, and vesting at Threshold is 80%, while vesting at Target is 100%, the percentage of vesting for the ROIC goal would be 90%, which is half-way between 80% and 100%.]

Exhibit 10.2

COMMERCIAL METALS COMPANY

LONG-TERM EQUITY AWARD AGREEMENT

_______________________
(the “ Participant ”)

has been granted a Restricted Stock Unit Award, which is described in this Award Agreement (the “ Agreement ”) in accordance with Article 6 of the Commercial Metals Company (the “ Company ”) 2006 Long-Term Equity Incentive Plan (the “ Plan ”). The “ Date of Grant ” is January 18, 2011.

This Agreement is subject to the terms of the Plan, and the terms of the Plan shall control in the event any provision of this Agreement is inconsistent with the provisions of the Plan. The capitalized terms used but not defined in this Agreement that are defined in the Plan shall have the meanings assigned to them in the Plan. The RSU Award (as defined in Section 1 below) may also be referred to herein as the “ Award .”

1. Restricted Stock Unit Award . The number of shares of Common Stock that may be delivered is __________ (the “ RSU Award ”).

a. Vesting; Timing of Delivery of Shares .

(A) First anniversary of the Date of Grant: One-Third of the total RSU Award.

(B) Second anniversary of the Date of Grant: One-Third of the total RSU Award.

Each of the periods described in Section 1.a.(i)(A), (B), and (C) above is a “ Vesting Year .”

(iii) Notwithstanding Section 1.a.(i) , 100% of the as-yet unvested RSU Award shall automatically become fully vested and payable upon the occurrence of a Change in Control.

2. Definitions . For purposes of this Agreement, the following term shall have the meaning set forth below:

3. Restrictions on Award and Rights of a Stockholder . The Participant will not be treated as a stockholder with respect to any shares of Common Stock covered by this Agreement until the shares are entered by book entry registration in the Company’s direct registration services or issuance of a certificate or certificates to the Participant for the shares. Article 11 of the Plan shall cover any adjustments for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates. Subject to the provisions of the Plan, until the date shares of Common Stock are delivered to the Participant under the Award (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge or assign any of the Award or any shares of Common Stock that may be delivered under the Award. All of the rights of the Participant in the Award and the Common Stock issued upon vesting of the Award are subject to Section 15 of this Agreement.

4. Book Entry or Certificate Issuance of Shares and Legend . All shares of Common Stock delivered shall be represented by, at the option of the Company, either book entry registration in the Company’s direct registration services or by a certificate. If the Common Stock was not issued in a

transaction registered under the federal and state securities laws, all shares of Common Stock delivered under the Award that are issued in certificate form shall bear a restrictive legend and shall be held indefinitely, unless they are subsequently registered under the federal and state securities laws or the Participant obtains an opinion of counsel, satisfactory to the Company, that registration is not required. All shares of Common Stock delivered that are issued in book entry direct registration services form shall be subject to the same restrictions described in a restrictive legend.

5. 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.

6. Investment Representation . Unless the Common Stock is issued to him in a transaction registered under federal and state securities laws, the Participant represents and warrants that all Common Stock which may be acquired hereunder will be acquired by the Participant for investment purposes for his own account and not with any intent for resale or distribution in violation of federal or state securities laws.

7. 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 is familiar with the terms of the Plan, and accepts this Award subject to all the terms of the Plan. The Participant 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.

8. Law Governing; Venue . 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). Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement shall be brought in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such proceeding, waives any objection it may now or hereafter have to venue or convenience of forum, agrees that all claims in respect of the proceedings shall be heard and determined only in any such court and agrees not to bring any proceeding arising out of or relating to this Agreement in any other court.

9. Legal Construction . In the event that any term of this Agreement is held by a court to be invalid in any respect, the invalid term shall not affect any other term that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid term had never been contained herein.

10. 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 of this Agreement and constitute the sole agreements between the parties with respect to the subject matter.

11. Parties Bound . The terms 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 set forth in this Agreement.

12. Modification . No change or modification of this Agreement shall be valid unless the change or modification is in writing and signed by the parties. However, the Company may change or modify the terms of this Agreement without the Participant’s consent or signature if the Company determines that such change or modification is necessary to comply with or be exempt from the requirements of Section 409A of the Code. In any event, the Company may amend the Plan or revoke the Award to the extent permitted by the Plan.

13. Tax Requirements . The Participant should consult immediately with his own tax advisor regarding the tax consequences of this Agreement. The Company (or a Subsidiary that is the Participant’s employer) (for purposes of this Section 13 “ Company ” includes any applicable Subsidiary), shall have the right to deduct from all amounts paid in stock, cash or any other form, any taxes required by law to be withheld in connection with this Award. The Company may also require the Participant receiving shares of Common Stock to pay the Company the amount of any taxes that the Company is required to withhold in connection with this Award. Such payments shall be made when requested by Company and may be required prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made at the election of the Participant (i) by the delivery of cash to the Company in an amount that equals (or exceeds, to the extent necessary to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months, with an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the vesting of this Award, with an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment (the “ Share Retention Method ”); or (iv) any combination of (i), (ii), or (iii). However, if the Participant is subject to Section 16 of the Securities Exchange Act of 1934, his withholding obligation under this Section 13 shall be satisfied by the Share Retention Method, and neither the Company nor the Committee shall have any discretion to permit the satisfaction of such withholding obligation by any other means.

14. Section 409A; Delay of Payment .

15. Forfeiture or Recovery . Notwithstanding anything to the contrary in the Plan, if the Committee determines, in its sole discretion, that the Participant has engaged in fraud or misconduct that relates to, in whole or in part, the need for a required restatement of the Company’s financial statements filed with the Securities and Exchange Commission, the Committee will review all incentive compensation awarded to or earned by the Participant, including, without limitation, any Award under the Plan, with respect to fiscal periods materially affected by the restatement and may cause to be forfeited any vested or unvested Award and may recover from the Participant all incentive compensation to the extent that the Committee deems appropriate after taking into account the relevant facts and circumstances. Any recoupment hereunder may be in addition to any other remedies that may be available to the Company under any other agreement or applicable law, including disciplinary action up to and including termination of employment.


		COMPANY:

		COMMERCIAL METALS COMPANY

		By:

		Name:

		Title:


		PARTICIPANT:


		Signature

		Name:

		Address:

Exhibit 10.3

EXECUTION VERSION

RECEIVABLES SALE AGREEMENT

Dated as of April 5, 2011

by and between

COMMERCIAL METALS COMPANY

CMC COMETALS PROCESSING, INC.

HOWELL METAL COMPANY

STRUCTURAL METALS, INC.

CMC STEEL FABRICATORS, INC.

SMI STEEL INC.

SMI — OWEN STEEL COMPANY, INC.

AHT, INC.,

as the Originators,

and

CMC RECEIVABLES, INC.,

as the Buyer

Receivables Sale Agreement

CHI60, 775,768v12

TABLE OF CONTENTS


	Page
Article I Amounts and Terms		2

Section 1.1. Purchase and Contribution of Receivables		2
Section 1.2. Payment for the Purchase		3
Section 1.3. Purchase Price Credit Adjustments		4
Section 1.4. Payments and Computations, Etc.		5
Section 1.5. Transfer of Records		5
Section 1.6. Characterization		5

Article II Representations and Warranties		6

Section 2.1. Representations and Warranties of Each of the Originators		6

Article III Conditions of Purchase		11

Section 3.1. Conditions Precedent to Closing		11
Section 3.2. Conditions Precedent to Subsequent Payments		11

Article IV Covenants		12

Section 4.1. Affirmative Covenants of Each of the Originators		12
Section 4.2. Negative Covenants of the Each of the Originators		15

Article V Termination Events		17

Section 5.1. Termination Events		17
Section 5.2. Remedies		18

Article VI Indemnification		19

Section 6.1. Indemnities by the Each of the Originators		19
Section 6.2. Other Costs and Expenses		21

Article VII Miscellaneous		21

Section 7.1. Waivers and Amendments		21
Section 7.2. Notices		22
Section 7.3. Protection of Ownership Interests of the Buyer		22
Section 7.4. Confidentiality		23
Section 7.5. Bankruptcy Petition		24
Section 7.6. Amounts to be paid by Buyer		24
Section 7.7. Setoff		24
Section 7.8. CHOICE OF LAW		25
Section 7.9. CONSENT TO JURISDICTION		25
Section 7.10. WAIVER OF JURY TRIAL		25
Section 7.11. Integration; Binding Effect; Survival of Terms		25
Section 7.12. Counterparts; Severability; Section References		26
Section 7.13. PATRIOT Act		26

Receivables Sale Agreement

Exhibits


Exhibit I		Definitions

Exhibit II		Jurisdiction of Incorporation; Organizational Identification Number; Principal Places of Business; Chief Executive Office; Locations of Records; Federal Employer Identification Number; Other Names

Exhibit III		Lock-Boxes; Collection Accounts; Collection Banks

Exhibit IV		Form of Compliance Certificate

Exhibit V		Form of Subordinated Note

Exhibit VI		Form of Purchase Report

Schedules

Schedule A		Documents to be Delivered to Buyer on or Prior to the Closing Date

Schedule B		Provisions to be included in any pledge

Receivables Sale Agreement

RECEIVABLES SALE AGREEMENT

THIS RECEIVABLES SALE AGREEMENT, dated as of April 5, 2011 (as amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”), is by and among COMMERCIAL METALS COMPANY, a Delaware corporation (“ CMC ”), CMC COMETALS PROCESSING, INC. , a Texas corporation (“ Cometals Processing ”), HOWELL METAL COMPANY , a Virginia corporation (“ Howell ”), STRUCTURAL METALS, INC. , a Texas corporation (“ SMI ”), CMC STEEL FABRICATORS, INC. , a Texas corporation (“ CMC Steel ”), SMI STEEL INC. , an Alabama corporation (“ SMI Steel ”), SMI-OWEN STEEL COMPANY, INC. , a South Carolina corporation (“ SMI Owen ”) and AHT, INC. , a Pennsylvania corporation (“ AHT ”, together with CMC, Cometals Processing, Howell, SMI, CMC Steel, SMI Steel and SMI Owen, the “ Originators ” and each of the Originators other than CMC, a “Subsidiary Originator” ), and CMC RECEIVABLES, INC. , a Delaware corporation (the “ Buyer ”). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I attached hereto (or, if not defined in Exhibit I attached hereto, the meanings assigned to such terms in Exhibit I to the Purchase Agreement).

PRELIMINARY STATEMENTS

The Originators now own, and from time to time hereafter will own, certain Receivables. Upon the terms and conditions hereinafter set forth, (a) CMC wishes to contribute to the Buyer’s capital all of CMC’s right, title and interest in and to all of CMC’s existing and future Receivables, together with the Related Security and Collections with respect thereto and all proceeds of the foregoing, and the Buyer wishes to accept such capital contributions, and (b) each Subsidiary Originator wishes to sell and assign to the Buyer, and the Buyer wishes to purchase from such Subsidiary Originator, all of each such Subsidiary Originator’s right, title and interest in and to all existing and future Receivables, together with the Related Security and Collections with respect thereto and all proceeds of the foregoing.

Each Originator and the Buyer intend the transactions contemplated hereby to be true sales (and, solely in the case of CMC, true contributions) of the Receivables Assets from the Originators to the Buyer, providing the Buyer with the full benefits of ownership of the Receivables Assets, and none of the Originators and the Buyer intend these transactions to be, or for any purpose to be characterized as, loans from the Buyer to any Originator secured by the Receivables Assets.

Immediately following its acquisition of the Receivables Assets from the Originators, the Buyer will sell the Receivables to certain purchasers pursuant to that certain Receivables Purchase Agreement dated as of April 5, 2011 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the “ Purchase Agreement ”) among the Buyer, the Servicer,

Receivables Sale Agreement

the Purchasers from time to time party thereto and Wells Fargo Bank, N.A., as administrative agent for the Purchasers (together with its successors and permitted assigns in such capacity, the “ Administrative Agent ”).

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Article I
Amounts and Terms

Section 1.1. Purchase and Contribution of Receivables .

(a) Effective on the Closing Date: (i) CMC hereby contributes, assigns, transfers, sets-over and otherwise conveys to the Buyer’s capital, without recourse to CMC (except to the extent expressly provided herein), and the Buyer hereby accepts, all of CMC’s right, title and interest in and to all of CMC’s Receivables existing as of the close of business on the Initial Cutoff Date and thereafter arising through and including the Termination Date (collectively, the “Contributed Receivables” ), together with all Related Security and Collections associated therewith (collectively, the “Contributed Receivables Assets” ); and (ii) in consideration for the Purchase Price and upon the terms and subject to the conditions set forth herein, each of the Subsidiary Originators hereby sells, assigns, transfers, sets-over and otherwise conveys to the Buyer, without recourse (except to the extent expressly provided herein), and the Buyer hereby purchases from each Subsidiary Originator, all of such Subsidiary Originators’ right, title and interest in and to all Receivables existing as of the close of business on the Initial Cutoff Date and all Receivables thereafter arising through and including the Termination Date (collectively, the “Purchased Receivables” ), together, in each case, with all Related Security relating thereto and all Collections thereof (collectively, the “Purchased Receivables Assets ”, together with the Contributed Receivables Assets, the “ Receivables Assets ”). In accordance with the preceding sentence, on the Closing Date the Buyer shall acquire all of the Originators’ right, title and interest in and to the Contributed Receivables Assets and the Purchased Receivables Assets. The Buyer shall be obligated to pay the Purchase Price for each Receivable purchased from a Subsidiary Originator hereunder in accordance with Section 1.2 .

(b) On the Monthly Reporting Date the Originators shall (or shall require the Servicer to) deliver to the Buyer a report in substantially the form of Exhibit VI hereto (each such report, a “ Purchase Report ”) with respect to the Receivables sold and/or contributed by the Originators to the Buyer during such Calculation Period.

(c) It is the intention of the parties hereto that each transfer of Receivables hereunder shall constitute a true sale and/or contribution, which sale and/or contribution, as the case may be, is absolute and irrevocable and provides the Buyer with the full benefits of ownership of the Receivables and the associated Related Security and Collections. Except for the Purchase Price Credits owed pursuant to Section 1.3 , each transfer of Receivables Assets hereunder is made without recourse to any of the Originators; provided , however , that (i) each Originator shall be liable to the Buyer for all representations, warranties, covenants and indemnities made by it

Receivables Sale Agreement

pursuant to the terms of the Transaction Documents to which it is a party, and (ii) such transfer does not constitute and is not intended to result in an assumption by the Buyer or any assignee thereof of any obligation of the Originators or any other Person arising in connection with the Receivables Assets or any other obligations of the Originators. In view of the intention of the parties hereto that each purchase and contribution shall constitute a true sale and/or true contribution of Receivables and the associated Related Security and Collections, rather than a loan secured thereby, each Originator agrees that it will, on or prior to the Closing Date and in accordance with Section 4.1(e)(ii) , mark its master data processing records relating to the Receivables with a legend acceptable to the Buyer and to the Administrative Agent (as the Buyer’s assignee), evidencing that the Buyer has acquired such Receivables as provided in this Agreement and to note in its financial statements that its Receivables have been absolutely sold or contributed to the Buyer. Upon the request of the Buyer or the Administrative Agent (as the Buyer’s assignee), each Originator will execute (if required) and file or authorize the filing of such financing statements, continuation statements, and amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate to perfect and maintain the perfection of the Buyer’s ownership interest in the Receivables Assets, or as the Buyer or the Administrative Agent (as the Buyer’s assignee) may reasonably request.

Section 1.2. Payment for the Purchase .

(a) On the Closing Date, immediately after the Buyer’s acceptance of the contribution of the Contributed Receivables Assets from CMC, the Purchase Price for all other Receivables Assets in existence as of the close of business on the Initial Cutoff Date shall be payable in full by the Buyer to the applicable Subsidiary Originator by delivery of a Subordinated Note by Buyer to the applicable Subsidiary Originator in an aggregate principal amount not to exceed the lesser of (i) the Purchase Price therefor and (ii) the maximum loan (each such loan, a “ Subordinated Loan ”) that could be borrowed by the Buyer from the applicable Subsidiary Originator without rendering the Buyer’s Net Worth less than the Required Capital Amount.

(b) The Purchase Price for each Receivable coming into existence after the Initial Cutoff Date shall become owing in full by the Buyer to the applicable Subsidiary Originator or its designee on the date each such Receivable comes into existence and shall be paid to the applicable Subsidiary Originator on the next succeeding Monthly Settlement Date in the following manner:

(i) by delivery of immediately available funds, to the extent of Available Cash; and/or

(ii) by an increase in the amount then outstanding under the applicable Subordinated Note, but subject to the limitations set forth in Section 1.2(a) .

(c) Subject to the limitations set forth in Section 1.2(a) , each Subsidiary Originator irrevocably agrees to advance each Subordinated Loan requested by the Buyer prior to the Termination Date. Each Subordinated Loan shall be evidenced by, and shall be payable in accordance with the terms and provisions of a Subordinated Note and shall be payable solely from Available Cash. Each Subsidiary Originator is hereby authorized by the Buyer to endorse

Receivables Sale Agreement

on the schedule attached to its Subordinated Note an appropriate notation evidencing the date and amount of each advance thereunder, as well as the date of each payment with respect thereto, provided that the failure to make such notation shall not affect any obligation of the Buyer thereunder.

Section 1.3. Purchase Price Credit Adjustments .

If on any day:

(a) the Outstanding Balance of a Receivable originated by any Originator is:

(i) reduced as a result of any defective or rejected or returned goods or services, any cash discount or any adjustment or otherwise by such Originator or any Affiliate thereof, or

(ii) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction), or

(iii) reduced on account of the obligation of such Originator or any Affiliate thereof to pay the related Obligor any rebate or refund, or

(iv) less than the amount included in the calculations in any Purchase Report, or

(b) any of the representations and warranties set forth in Section 2.1(h) , Section 2.1(i) , Section 2.1(j) , Section 2.1(q) , Section 2.1(r) , Section 2.1(s) or Section 2.1(t) is not true when made or deemed made with respect to any Receivable,

then, in such event, the Buyer shall be entitled to a credit (each, a “ Purchase Price Credit ”) against the Purchase Price otherwise payable hereunder equal to (A) in the case of clauses (a)(i)-(iv) above, the amount of such reduction or cancellation or the difference between the actual Outstanding Balance and the amount included in calculating the Net Pool Balance, as applicable; and (B) in the case of clause (b) above, in the amount of the Outstanding Balance of such Receivable (calculated before giving effect to the applicable reduction or cancellation). If such Purchase Price Credit exceeds the Original Balance of the Receivables originated by the applicable Subsidiary Originator in any Calculation Period, then the applicable Subsidiary Originator shall pay the remaining amount of such Purchase Price Credit in cash on the next succeeding Monthly Settlement Date, provided that if the Facility Termination Date has not occurred, any such Subsidiary Originator shall be allowed to deduct the remaining amount of such Purchase Price Credit from any indebtedness owed to it under its Subordinated Note; provided, further, that no Purchase Price Credit shall include any amount to the extent the same represents losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor. Purchase Price Credits owing from CMC shall be reflected solely as reductions of CMC’s equity in Buyer.

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Section 1.4. Payments and Computations, Etc .

All amounts to be paid or deposited by the Buyer hereunder shall be paid or deposited in accordance with the terms hereof on the day when due in immediately available funds to the account of the applicable Originator designated from time to time by each Originator or as otherwise directed by the applicable Originator. In the event that any payment owed by any Person hereunder becomes due on a day that is not a Business Day, then such payment shall be made on the next succeeding Business Day. If any Person fails to pay any amount hereunder when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid in full; provided, however, that such Default Fee shall not at any time exceed the maximum rate permitted by applicable law. All computations of interest payable hereunder shall be made on the basis of a year of 360 days (or, in the case of any calculation thereof based upon the Prime Rate, 365 or 366 days, as applicable) for the actual number of days (including the first but excluding the last day) elapsed.

Section 1.5. Transfer of Records .

(a) In connection with any sale or contribution of Receivables hereunder, each Originator hereby contributes, sells, transfers, assigns and otherwise conveys to the Buyer all of its right and title to and interest in the Records relating to all Receivables sold or contributed hereunder, without the need for any further documentation in connection with such sale or contribution. In connection with such transfer, each Originator hereby grants to each of the Buyer, the Administrative Agent and the Servicer an irrevocable, non-exclusive license to use, without royalty or payment of any kind, all software used by such Originator to account for the Receivables, to the extent necessary to administer the Receivables, whether such software is owned by the applicable Originator or is owned by others and used by any Originator under license agreements with respect thereto, provided that should the consent of any licensor of such software be required for the grant of the license described herein, to be effective, each Originator hereby agrees that upon the request of the Buyer (or the Buyer’s assignee), such Originator will use its reasonable efforts to obtain the consent of such third-party licensor. The license granted hereby shall be irrevocable until the indefeasible payment in full of the Aggregate Unpaids, and shall terminate on the date this Agreement terminates in accordance with its terms.

(b) Each Originator (i) shall take such action requested by the Buyer and/or the Administrative Agent (as Buyer’s assignee), from time to time hereafter, that may be necessary or appropriate to ensure that the Buyer and its assigns under the Purchase Agreement have an enforceable ownership interest in the Records relating to the Receivables purchased from any Originator hereunder, and (ii) shall use its reasonable efforts to ensure that each of the Buyer, the Administrative Agent and the Servicer has an enforceable right (whether by license or sublicense or otherwise) to use all of the computer software used to account for the Receivables and/or to re-create such Records.

Section 1.6. Characterization .

If, notwithstanding the intention of the parties expressed in Section 1.1(c) , any transfer by any Originator to the Buyer of Receivables hereunder shall be characterized in any manner other

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than a true sale or true contribution or such transfer for any reason shall be ineffective or unenforceable, then this Agreement shall be deemed to constitute a security agreement under the applicable UCC and other applicable law. For this purpose and without being in derogation of the parties’ intention that each transfer shall constitute a true sale or true contribution and absolute assignment thereof, each of the Originators hereby grants to the Buyer a security interest in all of such Originator’s right, title and interest in, to and under (i) all Receivables existing as of the close of business on the Initial Cutoff Date or thereafter arising from time to time prior to the Termination Date, and all rights and payments relating thereto, (ii) all Related Security relating thereto, whether existing on the Initial Cutoff Date or thereafter arising, (iii) all Collections thereof, whether existing on the Initial Cutoff Date or thereafter arising, (iv) each Lock-Box and each Lock-Box Account, whether existing on the Initial Cutoff Date or thereafter arising, and (v) all proceeds of any of the foregoing, whether existing on the Initial Cutoff Date or thereafter arising (collectively, the “ Originator Collateral ”), to secure the prompt and complete payment of a loan deemed to have been made by the Buyer to each Originator in an amount equal to the aggregate Purchase Price for the Purchased Receivables originated by such Subsidiary Originator (or, in the case of CMC, the Purchase Price that would have been payable for its Contributed Receivables had they not been contributed to the Buyer’s capital), together with all other obligations of such Originator hereunder, which security interest, each of the Originators hereby represents and warrants, is valid, duly perfected and prior to all Adverse Claims. The Buyer and its assigns shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative.

Article II

Representations and Warranties

Section 2.1. Representations and Warranties of Each of the Originators .

Each of the Originators hereby represents and warrants to the Buyer on the Closing Date and on each date on which a Receivable comes into existence prior to the Termination Date:

(a) Existence and Power . (i) Each of the Originators is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is a “registered organization” as defined in the UCC as in effect in such jurisdiction; (ii) each of the Originators has all requisite corporate or limited liability company power and authority to own its property and assets and to carry on its business as now conducted; (iii) each of the Originators is qualified to do business in, and is in good standing (where relevant) in every jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect, and (iv) each of the Originators has the requisite corporate or limited liability company power and authority to execute, deliver and perform its obligations under each of the Transaction Documents to which it is a party. Each Originator’s jurisdiction of incorporation, organizational identification number and federal employer identification number are correctly set forth in Exhibit II attached hereto.

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(b) Due Authorization . The execution, delivery and performance of the Transaction Documents to which it is a party (i) have been duly authorized by all requisite corporate and, if required, stockholder action, (ii) will not violate any provision of (A) any applicable law, statute, rule or regulation or order of any Governmental Authority, where such violation would result in a Material Adverse Effect, (B) its Organic Documents, (C) the Senior Credit Agreement, or (D) any other indenture, agreement or other instrument by which any Originator is a party or by which any of them or any of their property is bound, (iii) will not be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under or give rise to any right to require the prepayment, repurchase or redemption of any obligation under (A) the Senior Credit Agreement, or (B) any such other indenture, agreement or other instrument, or (iv) result in the creation or imposition of any Adverse Claim upon or with respect to the Originator Collateral.

(c) Enforceability . This Agreement and each other Transaction Document to which any Originator is a party have been duly executed and delivered by such Originator. This Agreement and each other Transaction Document to which any Originator is a party delivered on the Closing Date constitutes, and each other such Transaction Document when executed and delivered by such Originator will constitute, a legal, valid and binding obligation of each Originator enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium or similar laws of general applicability relating to or limiting creditors’ rights generally or by general equity principles. No transaction contemplated hereby requires compliance with any bulk sales act or similar law.

(d) Governmental Approvals . No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is necessary or will be required in connection with the Transaction Documents, except for (a) filings and registrations necessary to perfect the Buyer’s ownership interest in the Originator Collateral and the Administrative Agent’s security interests therein, and (b) such as have been made or obtained and are in full force and effect.

(e) Litigation; Compliance with Laws .

(i) Except as disclosed in Performance Guarantor’s November 30, 2010 financial statements, there are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of any Originator, threatened in writing against any such Originator or any business, property or rights of any such Person that is reasonably likely to be adversely determined, and which determination would have a Material Adverse Effect.

(ii) Neither any of the Originators or any of their respective material properties is in violation of any applicable law, rule or regulation, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, a breach of which, individually or in the aggregate, would have a Material Adverse Effect.

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(f) Taxes . Each of the Originators (or the Performance Guarantor on their behalf) has filed or caused to be filed all Federal, state and other Tax returns required to have been filed by it and has paid, caused to be paid, or made provisions for the payment of all Taxes due and payable by it and all assessments received by it, except for the filing of such returns or the payment of such Taxes and assessments, in each case, that are not overdue by more than 30 days, or if more than 30 days overdue, the amount or validity of which are being contested in good faith by appropriate proceedings and for which the applicable Originator or the Performance Guarantor, as applicable, shall have set aside on its books adequate reserves in accordance with GAAP.

(g) Accuracy of Information . To the knowledge of each of the Originators, the information, reports, financial statements, exhibits and schedules furnished (as modified or supplemented by other information so furnished) by or on behalf of the Performance Guarantor or any Originator to the Buyer, the Administrative Agent or the Purchasers (other than projections and other forward looking information and information of a general economic or industry specific nature) on or prior to the Closing Date in connection with the transactions contemplated hereby (taken as a whole) did not and, as of the Closing Date, does not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading.

(h) Use of Proceeds . None of the Originators is engaged principally, or as one of its important activities, in the business of purchasing or carrying Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. No part of the proceeds of any purchase will be used (i) to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or (ii) for a purpose in violation of Regulation U or Regulation X issued by the Board of Governors of the Federal Reserve System.

(i) Good Title . Each Receivable constitutes an “account” or a “payment intangible” within the meaning of the UCC. Immediately prior to its transfer hereunder and upon the creation of each Receivable coming into existence after the Initial Cutoff Date, each of the Originators owns and has good and marketable title thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents.

(j) Perfection .

(i) If any transfer by any Originator to the Buyer of Receivables hereunder shall be characterized in any manner other than a true sale or true contribution or such transfer for any reason shall be ineffective or unenforceable, this Agreement creates a valid and continuing security interest (as defined in the UCC) in all right, title and interest of each of the Originators in the Originator Collateral in favor of the Buyer, which security interest is prior to all other Adverse Claims and is enforceable as such as against creditors and purchasers from any of the Originators.

(ii) If any transfer by any Originator to the Buyer of Receivables hereunder shall be characterized in any manner other than a true sale or true contribution or such transfer for any reason shall be ineffective or unenforceable, there have been duly filed

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all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Buyer’s ownership interest and security interest in the Originator Collateral.

(k) Liens . Other than the security interest granted to the Buyer pursuant to this Agreement, none of the Originators has pledged, assigned, sold, granted a security interest in, or otherwise conveyed, any of the Originator Collateral.

(l) Places of Business and Locations of Records . The Originators’ principal places of business, chief executive offices and the offices where each of the Originators keeps all of its Records are located at the address(es) listed on Exhibit II attached hereto or such other locations of which the Buyer has been notified in accordance with Section 4.2(a) in jurisdictions where all action required by Section 4.2(a) has been taken and completed.

(m) Collections . The conditions and requirements set forth in Section 4.1(i) have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of its Collection Accounts at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit III attached hereto. None of the Originators has granted any Person, other than the Buyer (and its assigns), as contemplated by this Agreement, dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event. Each of the Originators has complied with the terms of each, and not made changes (without the prior written consent of the Administrative Agent) to any Collection Account Agreement. All Obligors have been directed by it to make payments on their Receivables to a Lock-Box listed on Exhibit III attached hereto.

(n) Names . The name in which each of the Originators has executed this Agreement is identical to its name as indicated on the public record of its jurisdiction of incorporation (as contemplated by § 9-503(a)(1) of the UCC) and in the past five (5) years, it has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement and as listed on Exhibit II attached hereto.

(o) Ownership of the Buyer . CMC owns, directly or indirectly, 100% of the issued and outstanding Equity Interests of the Buyer, free and clear of any Adverse Claim (subject to Section 4.2(i) , other than Adverse Claims granted in connection with any amendment of refinancing of the Senior Credit Agreement). Such Equity Interests are validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of the Buyer.

(p) Not an Investment Company . None of the Originators is an “investment company” as defined in the Investment Company Act of 1940, as amended, or any successor statute.

(q) Compliance with Credit and Collection Policy . Each of the Originators has complied with the Credit and Collection Policy in all material respects with regard to each Receivable and the related Contract, and has not made any change to such Credit and Collection

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Policy, except such change as to which the Buyer (or its assigns) has been notified in accordance with Section 4.1(a)(iv) .

(r) Fair Value . With respect to each Receivable purchased hereunder by the Buyer, (i) the consideration received by the applicable Subsidiary Originator represents adequate consideration and fair and reasonably equivalent value for such Purchased Receivable as of the date of its acquisition hereunder and (ii) such consideration is not less than the fair market value of such Purchased Receivable as of the date of its acquisition hereunder. With respect to each Receivable contributed hereunder by CMC to the Buyer, (i) the consideration received by CMC represents adequate consideration and fair and reasonably equivalent value for such Contributed Receivable as of the date of its contribution hereunder and (ii) such consideration is not less than the fair market value of such Contributed Receivable as of the date of its contribution hereunder.

(s) Enforceability of Contracts . Each Contract with respect to each Receivable is effective to create, and has created, a valid and binding obligation of the related Obligor to pay the Outstanding Balance of such Receivable created thereunder and any accrued interest thereon, enforceable against such Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(t) Eligible Receivables . Each Receivable identified as an Eligible Receivable on any Purchase Report was an Eligible Receivable on the date it was acquired from the applicable Originator hereunder.

(u) Accounting . In its stand-alone financial statements and unconsolidated worksheets, each Originator accounts for the transactions contemplated by this Agreement as true sales of the Receivables to the Buyer and/or as contributions of the Receivables to the Buyer’s equity capital and not as loans secured thereby.

(v) No Material Adverse Effect . Since November 30, 2010, no event, change or condition has occurred that (individually or in the aggregate) has had, or could reasonably be expected to have, an Material Adverse Effect.

(w) No Termination Event . No event has occurred and is continuing and no condition exists, or could result from any sale or contribution hereunder or from the application of the proceeds therefrom, that constitutes a Termination Event.

(x) OFAC . Neither the Performance Guarantor nor any Originator or any of their Subsidiaries (i) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative of Section 2, or (iii) is a Person on the list of Specially Designated

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Nationals and Blocked Persons or subject to the limitations or prohibitions under any other OFAC regulation or executive order.

(y) Originator Compliance . Each Originator is in compliance with: (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto; and (ii) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001), as amended.

Article III

Conditions of Purchase

Section 3.1. Conditions Precedent to Closing .

The occurrence of the Closing Date under this Agreement is subject to the conditions precedent that (a) the Buyer shall have received on or before the Closing Date those documents listed on Schedule A attached hereto and (b) all of the conditions to the effectiveness of the Purchase Agreement shall have been satisfied or waived in accordance with the terms thereof.

Section 3.2. Conditions Precedent to Subsequent Payments .

The Buyer’s obligation to pay for any Purchased Receivable or accept the contribution of any Contributed Receivable coming into existence after the Initial Cutoff Date shall be subject to the conditions precedent that: (a) the Facility Termination Date shall not have occurred under the Purchase Agreement; and (b) on the date such Receivable came into existence, the following statements shall be true (and acceptance of the proceeds of any payment for such Receivable shall be deemed a representation and warranty by each of the Originators that such statements are then true):

(i) the representations and warranties set forth in Article II are true and correct in all material respects on and as of the date such Receivable came into existence as though made on and as of such date (except to the extent such representations and warranties refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date); and

(ii) no Termination Event is continuing.

Notwithstanding the foregoing conditions precedent, upon payment of the Purchase Price for any Receivable (whether by payment of cash, through an increase in the amounts outstanding under a Subordinated Note, by offset of amounts owed to the Buyer and/or by offset of capital contributions), title to such Receivable and the other related Receivables Assets shall vest in the Buyer, whether or not the conditions precedent to the Buyer’s obligation to pay for such Receivable were in fact satisfied. The failure of any of the Originators to satisfy any of the foregoing conditions precedent, however, shall give rise to a right of the Buyer to rescind the

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related purchase and direct the applicable Originator to pay to the Buyer an amount equal to the Purchase Price payment that shall have been made with respect to any Receivables related thereto.

Article IV

Covenants

Section 4.1. Affirmative Covenants of Each of the Originators .

Until the date on which this Agreement terminates in accordance with its terms, each of the Originators hereby covenants as set forth below:

(a) Financial Reporting . Each of the Originators will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and will furnish or cause to be furnished to the Buyer (or its assigns):

(i) Originators’ Compliance Certificates . A compliance certificate in the form of Exhibit IV hereto, duly executed by an Authorized Officer of each of the Originators.

(ii) Performance Guarantor Statements and Reports . Copies of all financial statements, reports, registration statements and certificates furnished by the Performance Guarantor pursuant to the Purchase Agreement.

(iii) Copies of Notices . Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Collection Account Agreement or other Transaction Document from any Person other than the Buyer, the Purchasers or the Administrative Agent, copies of the same.

(iv) Change in Credit and Collection Policy . At least thirty (30) days prior to the effectiveness of any change in or amendment to the Credit and Collection Policy, a copy of the Credit and Collection Policy then in effect and a notice (A) indicating such proposed change or amendment, and (B) if such proposed change or amendment could be reasonably likely to adversely affect the collectability of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Buyer’s (and the Administrative Agent’s, as the Buyer’s assignee) consent thereto.

(v) Other Information . Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of each of the Originators as the Buyer (or its assigns) may from time to time reasonably request in order to protect the interests of the Buyer (and its assigns) under or as contemplated by this Agreement.

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(b) Notices . Each of the Originators will notify the Buyer in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

(i) Termination Events or Unmatured Termination Events . The occurrence of each Termination Event and each Unmatured Termination Event, by a statement of its Authorized Officer.

(ii) Defaults Under Other Agreements . The occurrence of a default or an event of default under any other financing arrangement pursuant to which it is a debtor or an obligor; provided that no notice shall be required under this clause (ii) with respect to any default involving less than $50,000,000.

(c) Compliance with Laws and Preservation of Existence . Each of the Originators will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to comply is not reasonably likely to result in an Material Adverse Effect. Each of the Originators will do or cause to be done all things reasonably necessary to preserve, renew and maintain its legal existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign entity in each jurisdiction where its business is conducted, except where the failure to do so would not result in a Material Adverse Effect.

(d) Audits . Each of the Originators will furnish to the Buyer (or the Administrative Agent) from time to time such information with respect to it and the Receivables as the Buyer (or the Administrative Agent) may reasonably request. Each of the Originators will, from time to time during regular business hours as reasonably requested by the Buyer (or the Administrative Agent), upon at least 5 (five) Business Days notice and at its sole cost, permit the Buyer (and the Administrative Agent) or their respective agents or representatives (i) to examine and make copies of and abstracts from all Records in its possession or under its control relating to the Receivables and the Related Security, including, without limitation, the related Invoices and Contracts, and (ii) to visit its offices and properties for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to its financial condition or the Receivables and the Related Security or its performance under any of the Transaction Documents or its performance under the Contracts and, in each case, with any of its officers or employees having knowledge of such matters (each such visit, a “ Review ”); provided that, so long as no Termination Event has occurred and is continuing, the Originators shall only be responsible for the costs and expenses of two (2) such Reviews in any one Contract Year.

(e) Keeping and Marking of Records and Books .

(i) Each of the Originators will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all

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Collections of and adjustments to each existing Receivable). Each of the Originators will give the Buyer (or its assigns) notice of any change in the administrative and operating procedures referred to in the previous sentence.

(ii) Each of the Originators will (A) on or prior to the date hereof, mark its master data processing records and other books and records relating to the Receivables with a legend, acceptable to the Buyer (and the Administrative Agent), describing the Buyer’s ownership interests in the Receivables and further describing ownership interests in the Receivable of the Administrative Agent (on behalf of the Purchasers) under the Purchase Agreement and (B) upon the reasonable request of the Buyer (or its assigns) following the occurrence of a Termination Event hereunder: (1) mark each Contract with a legend describing the Buyer’s ownership interests in the Receivables and further describing ownership interests in the Receivable of the Administrative Agent (on behalf of the Purchasers), and (2) deliver to the Buyer (or its assigns) all Contracts (including, without limitation, all multiple originals of any such Contract) relating to the Receivables that are in any of the Originators’ possession.

(f) Compliance with Contracts and Credit and Collection Policy . Each of the Originators will timely and fully (i) perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract.

(g) Ownership . Each of the Originators will take all necessary action to establish and maintain, irrevocably in the Buyer, (i) legal and equitable title to the Receivables and the Collections and (ii) all of its right, title and interest in the Related Security associated with the Receivables, in each case, free and clear of any Adverse Claims other than Adverse Claims in favor of the Buyer (and its assigns) (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Buyer’s security interest in the Receivables Assets and such other action to perfect, protect or more fully evidence the security interest of Buyer as Buyer (or its assigns) may reasonably request).

(h) Separateness . Each of the Originators acknowledges that the Administrative Agent and the Purchasers are entering into the transactions contemplated by the Purchase Agreement in reliance upon the Buyer’s identity as a legal entity that is separate from the Performance Guarantor, any of the Originators and any of their Affiliates. Therefore, from and after the date of execution and delivery of this Agreement, each of the Originators will take all reasonable steps including, without limitation, all steps that the Buyer or any assignee of the Buyer may from time to time reasonably request to maintain the Buyer’s identity as a separate legal entity and to make it manifest to third parties that the Buyer is an entity with assets and liabilities distinct from those of the Performance Guarantor, any of the Originators and their Affiliates and not just a division of any of the foregoing. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, each of the Originators (i) will not hold itself out to third parties as liable for the debts of the Buyer nor purport to own the Receivables Assets, (ii) will take all other actions necessary on its part to ensure that the Buyer is

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at all times in compliance with the “separateness covenants” set forth in Section 5.1(i) of the Purchase Agreement and (iii) will cause all tax liabilities arising in connection with the transactions contemplated herein or otherwise to be allocated between it and the Buyer on an arm’s-length basis and in a manner consistent with the procedures set forth in U.S. Treasury Regulations §§1.1502-33(d) and 1.1552-1.

(i) Collections . Each of the Originators will cause (i) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (ii) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables or Related Security are remitted directly to it or any of its Affiliates, it will remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within one (1) Business Day following receipt thereof and, at all times prior to such remittance, it will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Buyer and its assigns. Each of the Originators will transfer exclusive ownership, dominion and control of each Lock-Box and Collection Account to the Buyer and shall not grant the right to take dominion and control of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to the Buyer (or its assigns) as contemplated by this Agreement and the Purchase Agreement.

(j) Taxes . To the extent not done by the Performance Guarantor, each of the Originators will file all Tax returns and reports required by law to be filed by it and promptly pay all Taxes and governmental charges at any time owing, except any such taxes which are not yet delinquent or 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. Each of the Originators will pay when due any Taxes payable in connection with the Receivables, exclusive of Taxes on or measured by income or gross receipts of the Buyer and its assigns.

(k) Accuracy of Information . All information hereinafter furnished by any of the Originators or any of its Affiliates to the Buyer or the Administrative Agent (or any Purchaser) for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby will be true and accurate on the date such information is stated or certified and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading.

Section 4.2. Negative Covenants of the Each of the Originators .

Until the date on which this Agreement terminates in accordance with its terms, each of the Originators hereby covenants that:

(a) Change in Name, Jurisdiction of Incorporation, Offices and Records . It will not change (i) its name as it appears in the official public record in the jurisdiction of its incorporation (as contemplated by Section 9-503(a)(1) of the UCC), (ii) its status as a “registered organization” (within the meaning of Article 9 of any applicable enactment of the UCC), (iii) its organizational identification number, if any, issued by its jurisdiction of incorporation, or (iv) its

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jurisdiction of incorporation unless it shall have: (A) given the Buyer (or its assigns) at least thirty (30) days’ prior written notice thereof; (B) at least ten (10) days prior to such change, delivered to the Buyer (or its assigns) all financing statements, instruments and other documents reasonably requested by the Buyer (or its assigns) in connection with such change or relocation and (C) caused an opinion of counsel reasonably acceptable to the Buyer and its assigns to be delivered to the Buyer and its assigns that the Buyer’s security interest is perfected and of first priority, such opinion to be in form and substance similar to the related opinion delivered on the Closing Date and otherwise reasonably acceptable to the Buyer and its assigns.

(b) Change in Payment Instructions to Obligors . It will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors of Receivables regarding payments to be made to any Lock-Box or Collection Account, unless the Buyer (or its assigns) shall have received, at least twenty (20) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided , however , that it may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account and/or Lock-Box subject to a Collection Account Agreement.

(c) Modifications to Contracts and Credit and Collection Policy . It will not make any change in or amendment to the Credit and Collection Policy that could reasonably be expected to decrease the credit quality of any newly created Receivable or materially adversely affect the collectability of the Receivables. Except as otherwise permitted in its capacity as Servicer pursuant to the Purchase Agreement, it will not extend, amend or otherwise modify the terms of any Receivable or any Contract related to such Receivable in any material respect other than in accordance with the Credit and Collection Policy.

(d) Sales, Liens . Subject to Section 4.2(i) and other than the ownership and security interests contemplated by the Transaction Documents, it will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivables Asset, or upon or with respect to any Contract under which any Receivable arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of a security interest therein in favor of the Buyer provided for herein), and it will defend the right, title and interest of the Buyer in, to and under any of the foregoing property, against all claims of third parties claiming through or under it. None of the Originators shall create or suffer to exist any Adverse Claim on any of its inventory, the financing or lease of which gives rise to any Receivable.

(e) Accounting for Purchase . It will not account for or treat (whether in financial statements or otherwise) the transactions contemplated hereby in any manner other than the sale and/or contribution and absolute assignment of the Receivables and the Related Security by it to the Buyer or in any other respect account for or treat the transactions contemplated hereby in any manner other than as a sale and/or contribution and absolute assignment of the Receivables and

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the Related Security by it to the Buyer except to the extent that such transactions are not recognized on account of consolidated financial reporting in accordance with GAAP.

(f) OFAC . It will not use and has not used the proceeds of any sale of Receivables hereunder to fund any operations in, finance any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned Country.

(g) Foreign Corrupt Practices Act, Trading with the Enemy Act and Patriot Act . It has not used and will not use the proceeds of any Receivable or any sale hereunder, directly or indirectly, to make any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of (i) the United States Foreign Corrupt Practices Act of 1977, as amended, (ii) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto and/or (iii) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001), as amended.

(h) Deposits to Blocked Accounts and the Collection Account . It will not deposit or otherwise credit, or cause or knowingly permit to be so deposited or credited, to any Collection Account or Lock-Box cash or cash proceeds other than Collections.

(i) Pledge and security agreements . It will not enter into any agreement to pledge the capital stock of the Buyer or the Subordinated Notes unless the provisions of such pledge agreement are consistent with the provisions set forth in Schedule B hereto.

(j) Divisions of each Originator . Without giving the Buyer and the Administrative Agent at least fifteen (15) Business Days’ prior written notice, (i) it will not change or otherwise modify (or permit or consent to any change or other modification of) any division listed on Schedule C of the Purchase Agreement in a manner adversely affecting the security interest of the Administrative Agent or the perfection thereof or (ii) it will not change or otherwise modify (or permit or consent to any change or other modification of) the name of any such division listed on Schedule C of the Purchase Agreement.

Article V

Termination Events

Section 5.1. Termination Events .

The occurrence of any one or more of the following events shall constitute a Termination Event:

(a) Any representation, warranty, certification or statement made or deemed made by any of the Originators in this Agreement, any other Transaction Document or in any

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other document delivered pursuant hereto or thereto shall prove to have been false or misleading in any material respect when made or deemed made; provided that the materiality threshold in this subsection shall not be applicable with respect to any representation or warranty which itself contains a materiality threshold.

(b) Any of the Originators shall fail to make any payment or deposit required hereunder when due and such failure shall continue for one (1) Business Day.

(c) Any of the Originators shall fail to perform any covenant contained in Section 1.1(b) or 4.2 when due and, in the case of a failure to perform under Section 4.2 , such failure shall continue for five (5) Business Days after discovery thereof by the applicable Originator.

(d) Any of the Originators shall fail to perform or observe any other term, covenant or agreement under any of the Transaction Documents and continues for thirty (30) days from the date that is the earlier of (i) notice thereof to the applicable Originator by any Person and (ii) discovery thereof by the applicable Originator.

(e) An Event of Bankruptcy shall occur with respect to any of the Originators.

(f) (i) A Performance Undertaking Default shall occur, (ii) the Performance Undertaking shall cease to be effective or to be the legally valid, binding and enforceable obligation of the Performance Guarantor, or (iii) the Performance Guarantor shall repudiate its obligations thereunder.

(g) The Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Code with respect to amounts in excess of $100,000 with regard to any of the Receivables or Related Security and such lien shall not have been released within thirty (30) days.

Section 5.2. Remedies .

Upon the occurrence and during the continuation of a Termination Event, the Buyer may take any of the following actions: (a) declare the Termination Date to have occurred, whereupon the Termination Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by each of the Originators; provided , however , that upon the occurrence of an Event of Bankruptcy with respect to any of the Originators or the Performance Guarantor, or of an actual or deemed entry of an order for relief with respect to any of the Originators or the Performance Guarantor, under the Federal Bankruptcy Code, the Termination Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each of the Originators and (b) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any amounts then due and owing by any of the Originators to the Buyer. The aforementioned rights and remedies shall be without limitation and shall be in addition to all other rights and remedies of the Buyer and its assigns otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative.

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Article VI

Indemnification

Section 6.1. Indemnities by the Each of the Originators .

Without limiting any other rights that the Buyer may have hereunder or under applicable law, each of the Originators hereby agrees to indemnify (and to pay, within thirty (30) days after receipt of a reasonably detailed invoice, to) the Buyer, the Administrative Agent, the Purchasers, and their respective Related Parties (each of the foregoing, an “ Indemnified Party ”) from and against any and all damages, losses, claims, Taxes, liabilities, costs, reasonable expenses and for all other amounts payable, including reasonable fees and disbursements of external counsel (including local counsel) to the Indemnified Parties, awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by the Buyer of the Receivables (all of the foregoing being collectively referred to as “ Indemnified Amounts ”), excluding, however, in all of the foregoing instances:

(a) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from the gross negligence, fraud or willful misconduct on the part of such Indemnified Party or any of its Related Parties;

(b) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness or financial inability or unwillingness to pay (other than a dispute giving rise to a Purchase Price Credit) of the related Obligor; or

provided , however , that nothing contained in this sentence shall limit the liability of any of the Originators or limit the recourse of the Buyer to any of the Originators for amounts otherwise specifically provided to be paid by the applicable Originator under the terms of this Agreement, and provided, further, that none of the Originators shall have an obligation to reimburse any Indemnified Party for Indemnified Amounts unless such Indemnified Party, if requested, provides the applicable Originator with an undertaking in which such Indemnified Party agrees to refund and return any and all amounts paid by the applicable Originator to such Indemnified Party in respect of any amounts described in the foregoing clauses (a) , (b) and (c) . Without limiting the generality of the foregoing indemnification, but subject in each case to clauses (a) , (b) and (c) above, any of the Originators shall indemnify the Buyer for Indemnified Amounts relating to or resulting from:

(i) any representation or warranty made by any of the Originators (or any officers of such Originators) under or in connection with any Purchase Report, this Agreement, any other Transaction Document or any other information or report delivered by the applicable Originator pursuant hereto or thereto for which the Buyer has not received a Purchase Price Credit that shall have been false or incorrect when made or deemed made;

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(ii) the failure by any Originator to comply with any applicable law, rule or regulation with respect to any Receivable, Invoice or Contract related thereto, or the nonconformity of any Receivable, Invoice or Contract included therein with any such applicable law, rule or regulation or any failure of any Originator to keep or perform any of its obligations, express or implied, with respect to any Contract;

(iii) any failure of any Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document (subject to applicable grace periods);

(iv) any products liability, environmental liability, personal injury or damage, suit or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Contract or any Receivable;

(v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract 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 sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services;

(vi) the commingling of Collections of Receivables at any time by any Originator or any of its Affiliates with other funds;

(vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of any sale hereunder, the ownership of the Receivables or any other investigation, litigation or proceeding relating to any Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby;

(viii) any Event of Bankruptcy with respect to any Originator or the Performance Guarantor;

(ix) any failure of the Buyer to obtain and maintain legal and equitable title to, and ownership of, the Receivables and the Collections, and all of any Originators’ right, title and interest in the Related Security associated with the Receivables, in each case, free and clear of any Adverse Claim (except as created by the Transaction Documents);

(x) the failure to have filed, 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 Originator Collateral with respect thereto, and the proceeds of any thereof, whether at the time of its acquisition or at any subsequent time, except to the extent such failure or delay is caused by the Buyer or its assigns;

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(xi) any action or omission by any Originator which reduces or impairs the rights of the Buyer with respect to any Originator Collateral or the value of any Receivable;

(xii) any attempt by any Person to void any sale or contribution hereunder under statutory provisions or common law or equitable action; and

(xiii) the failure of any Receivable reflected as an Eligible Receivable on any Purchase Report to be an Eligible Receivable at the time acquired by the Buyer.

To the extent permitted by applicable law, none of the Originators shall assert and each Originator hereby waives any claim against any Indemnified Party on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any other Transaction Document. The provisions of this Section 6.1 shall survive termination of this Agreement and the Purchase Agreement.

Section 6.2. Other Costs and Expenses .

Each of the Originators shall pay to the Buyer on demand all reasonable and documented fees, costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder, and any amendments to or waivers of the foregoing. Each of the Originators shall pay to the Buyer on demand any and all reasonable fees, costs and expenses of the Buyer, if any, and the Administrative Agent (as Buyer’s assignee), including reasonable and documented counsel fees and expenses in connection with the enforcement of the Transaction Documents and in connection with any restructuring or workout of the Transaction Documents or the administration of the Transaction documents following a Termination Event.

Article VII

Miscellaneous

Section 7.1. Waivers and Amendments .

(a) No failure or delay on the part of the Buyer (or its assigns) in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given.

(b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing signed by each of the Originators, the Buyer and the Administrative

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Agent and, to the extent required under the Purchase Agreement, the Purchasers or the Required Purchasers.

Section 7.2. Notices .

All communications and notices provided for hereunder shall be in writing (including email, bank wire, or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or facsimile numbers set forth on the signature pages hereof or at such other address or facsimile number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective (a) if given by facsimile, upon the receipt thereof, (b) if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (c) if given by electronic mail, upon delivery thereof to the last known valid electronic mail address of the related recipient or (d) if given by any other means, when received at the address specified in accordance with this Section 7.2 .

Section 7.3. Protection of Ownership Interests of the Buyer .

(a) Each of the Originators agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that the Buyer (or its assigns) may reasonably request, to perfect, protect or more fully evidence the interest of the Buyer (or its assigns) hereunder, or to enable the Buyer (or its assigns) to exercise and enforce their rights and remedies hereunder. At any time following the occurrence of a Termination Event or Potential Termination Event hereunder, the Buyer (or its assigns) may, at any Originator’s sole cost and expense, direct any Originator to notify the Obligors of Receivables of the ownership interest of the Buyer under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Buyer or its designee.

(b) If, following the occurrence of a Termination Event or a Potential Termination Event hereunder, any of the Originators fails to perform any of its obligations hereunder, the Buyer (or its assigns) may (but shall not be required to) perform, or cause performance of, such obligations, and the Buyer’s (or such assigns’) costs and expenses incurred in connection therewith shall be payable by the Originators as provided in Section 6.2 . Each of the Originators irrevocably authorizes the Buyer (and its assigns) at any time and from time to time in the sole discretion of the Buyer (or its assigns), and appoints the Buyer (and its assigns) as its attorney(ies)-in-fact, to act on behalf of each of the Originators (i) to file on behalf of each of the Originators as debtors financing statements necessary or desirable in the Buyer’s (or its assigns’) sole discretion to perfect and to maintain the perfection and priority of the interest of the Buyer in the Originator Collateral and associated Related Security and Collections and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as the Buyer (or its assigns) in their sole discretion deem necessary or desirable to perfect and to maintain the perfection and priority of the Buyer’s security interest in the Originator Collateral. This appointment is coupled with an interest and is irrevocable.

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(c) (i) Each of the Originators hereby authorizes the Buyer (or its assigns) to file financing statements and other filing or recording documents with respect to the Receivables and Related Security (including any amendments thereto, or continuation or termination statements thereof), without the signature or other authorization of any of the Originators, in such form and in such offices as the Buyer (or any of its assigns) reasonably determines appropriate to perfect or maintain the perfection of the ownership or security interests of the Buyer (or its assigns) hereunder, (ii) each of the Originators acknowledges and agrees that it is not authorized to, and will not, file financing statements or other filing or recording documents with respect to the Receivables or Related Security (including any amendments thereto, or continuation or termination statements thereof), without the express prior written approval by the Administrative Agent (as the Buyer’s assignee), consenting to the form and substance of such filing or recording document, and (iii) each of the Originators hereby approves, authorizes and ratifies any filings or recordings made by or on behalf of the Administrative Agent (as the Buyer’s assign) in connection with the perfection of the ownership or security interests in favor of the Buyer or the Administrative Agent (as the Buyer’s assign).

Section 7.4. Confidentiality .

(a) Each of the Originators shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement, the Fee Letter and the other confidential or proprietary information with respect to the Administrative Agent and the Purchasers and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein that has been identified to the Seller Parties as confidential or proprietary, except that the any Originator and such Originators’ Affiliates, officers and employees may disclose such information to such Originator’s (or such Affiliates’) external accountants, consultants and attorneys and as required by any applicable law, Governmental Authority or order of any judicial or administrative proceeding.

(b) Anything herein to the contrary notwithstanding, each Originator hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Buyer, the Administrative Agent or the Purchasers by each other, (ii) by the Buyer, the Administrative Agent or the Purchasers to any prospective or actual assignee or participant of any of them and (iii) if applicable, by the Purchasers and the Administrative Agent to any rating agency, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which any Purchaser or one of its Affiliates, acts as the administrative agent and to any officers, directors, employees, outside accountants, attorneys, financial advisors and consultants of any of the foregoing and (iv) by the Purchasers and the Administrative Agent to any judicial, administrative or regulatory authority or in connection with proceedings (whether or not having the force or effect of law) pursuant to any law, rule, regulation, direction, request or order of any such judicial, administrative or regulatory authority or issued in proceedings.

(c) The Buyer shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or proprietary information with respect to each of the Originators, the Obligors and their respective businesses

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obtained by it in connection with the due diligence evaluations, structuring, negotiating, execution and administration of the Transaction Documents, and the consummation of the transactions contemplated herein and any other activities of the Buyer arising from or related to the transactions contemplated herein provided , however , that each of the Buyer and its employees and officers shall be permitted to disclose such confidential or proprietary information: (i) to the Administrative Agent and the initial Purchasers, (ii) to any officers, directors, employees, outside accountants and attorneys of any of the foregoing who need to know such information and who are instructed to maintain the confidentiality of such information in conformity with this Section 7.4 , and (iii) to the extent required pursuant to any applicable law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings with competent jurisdiction (whether or not having the force or effect of law).

Section 7.5. Bankruptcy Petition .

Each of the Originators covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding obligations of the Buyer under the Purchase Agreement, it will not institute against, or join any other Person in instituting against, the Buyer or any commercial paper conduit that hereafter becomes a Purchaser under the Purchase Agreement, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

Section 7.6. Amounts to be paid by Buyer.

Notwithstanding anything in this Agreement to the contrary, the Buyer shall not have any obligation to pay any amount required to be paid by it hereunder in excess of any amount available to it after paying or making provision for the payment of its obligations under the Purchase Agreement. All payment obligations of the Buyer hereunder are contingent on the availability of funds in excess of the amounts necessary to pay its obligations under the Purchase Agreement.

Section 7.7. Setoff .

(a) None of the Originators’ obligations under this Agreement shall be affected by any right of setoff, counterclaim, recoupment, defense or other right the applicable Originator may have against the Buyer, any of the Purchasers, the Administrative Agent or any assignee, all of which setoff rights are hereby waived by each of the Originators as against such obligations.

(b) The Buyer shall have the right to set-off against each of the Originators any amounts to which any of the Originators may be entitled and to apply such amounts to any claims the Buyer may have against the applicable Originator from time to time under this Agreement. Upon any such set-off, the Buyer shall give notice of the amount thereof and the reasons therefor to the applicable Originator.

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Section 7.8. CHOICE OF LAW .

THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS.

Section 7.9. CONSENT TO JURISDICTION .

EACH OF THE ORIGINATORS HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY EACH ORIGINATOR PURSUANT TO THIS AGREEMENT AND EACH ORIGINATOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE BUYER (OR ITS ASSIGNS) TO BRING PROCEEDINGS AGAINST ANY ORIGINATOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY OF THE ORIGINATORS AGAINST THE BUYER (OR ITS ASSIGNS) OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY ANY ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

Section 7.10. WAIVER OF JURY TRIAL .

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, EACH OTHER TRANSACTION DOCUMENT, ANY DOCUMENT EXECUTED BY ANY OF THE ORIGINATORS PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

Section 7.11. Integration; Binding Effect; Survival of Terms .

(a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.

(b) This Agreement shall be binding upon and inure to the benefit of each Originator, the Buyer and their respective successors and permitted assigns (including any trustee in

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bankruptcy). No Originator may assign any of its rights and obligations hereunder or any interest herein without the prior written consent of the Buyer. The Buyer may assign at any time its rights and obligations hereunder and interests herein to any other Person without the consent of any of the Originators. Without limiting the foregoing, each Originator acknowledges that the Buyer, pursuant to the Purchase Agreement, may assign to the Administrative Agent, for the benefit of the Purchasers, its rights, remedies, powers and privileges hereunder and that the Administrative Agent may further assign such rights, remedies, powers and privileges to the extent permitted in the Purchase Agreement. Each of the Originators agrees that the Administrative Agent, as the assignee of the Buyer, shall, subject to the terms of the Purchase Agreement, have the right to enforce this Agreement and to exercise directly all of the Buyer’s rights and remedies under this Agreement (including, without limitation, the right to give or withhold any consents or approvals of the Buyer to be given or withheld hereunder) and each of the Originators agrees to cooperate fully with the Administrative Agent in the exercise of such rights and remedies. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided , however , that the rights and remedies with respect to (i) any breach of any representation and warranty made by any of the Originators pursuant to Article II ; (ii) the indemnification and payment provisions of Article VI ; and (iii) Section 7.5 shall be continuing and shall survive any termination of this Agreement.

Section 7.12. Counterparts; Severability; Section References .

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. Delivery of an executed counterpart of a signature page by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to “Article,” “Section,” “Schedule” or “Exhibit” shall mean articles and sections of, and schedules and exhibits to, this Agreement.

Section 7.13. PATRIOT Act .

The Administrative Agent, as the Buyer’s assignee, hereby notifies you on behalf of the Purchasers that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “ PATRIOT Act ”), the Administrative Agent and the Purchasers may be required to obtain, verify and record information that identifies each of the Originators and the Performance Guarantor, which information includes the name, address, tax identification number and other information regarding each of the Originators and the Performance Guarantor that will allow the Administrative Agent and the Purchasers to identify each of the Originators and the Performance Guarantor in accordance with the PATRIOT Act. This notice is given in accordance with the requirements of the PATRIOT Act. Each of the

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Originators agrees to provide the Administrative Agent, from time to time prior to and after the Closing Date, with all documentation and other information required by bank regulatory authorities under “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act.

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof.


		COMMERCIAL METALS COMPANY ,
		as an Originator

		By: Name:		/s/ Murray R. McClean Murray R. McClean
		Title:		President, Chief Executive Officer and Chairman of the Board of Directors

		Address for Notices :
		6565 N. MacArthur Blvd., Suite 800
		Irving, TX 75039
		Attn:		VP and Treasurer
		Email:		louis.federle@cmc.com
		Phone:		(214) 689-4370
		Fax:		(214) 932-7960