COMMERCIAL METALS CO (Form: 10-Q, Received: 04/07/2006 17:01:17)

FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

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

For the quarterly period ended February 28, 2006

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 incorporation of organization)		(I.R.S. Employer 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 is a shell company (as defined by Rule 12b-2 of the Exchange Act).


Yes o		No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filer o	Non-Accelerated filer o

As of April 6, 2006, there were 60,160,954 shares of the Company’s common stock issued and outstanding excluding 4,369,378 shares held in the Company’s treasury.

TABLE OF CONTENTS


PART 1. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
Certificate of Amendment of Restated Certificate of Incorporation
Form of Executive Employment Continuity Agreement
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

ASSETS


	February 28,			August 31,
(in thousands)	2006			2005

Current assets:
Cash and cash equivalents	$	72,111		$	119,404
Accounts receivable (less allowance for collection losses of $16,567 and $17,167)		901,040			829,192
Inventories		765,825			706,951
Other		52,087			45,370

Total current assets		1,791,063			1,700,917

Property, plant and equipment:
Land		44,004			41,887
Buildings and improvements		252,003			245,924
Equipment		874,233			863,748
Construction in process		84,657			49,183

		1,254,897			1,200,742
Less accumulated depreciation and amortization		(722,734	)		(695,158	)

		532,163			505,584
Goodwill		30,542			30,542
Other assets		117,602			95,879

	$	2,471,370		$	2,332,922

See notes to unaudited condensed consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY


	February 28,			August 31,
(in thousands except share data)	2006			2005

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	439,545		$	408,342
Accounts payable-documentary letters of credit		100,109			140,986
Accrued expenses and other payables		240,026			293,598
Income taxes payable and deferred income taxes		39,248			40,126
Short-term trade financing arrangements		—			1,667
Current maturities of long-term debt		9,743			7,223

Total current liabilities		828,671			891,942

Deferred income taxes		45,579			45,629
Other long-term liabilities		72,703			58,627
Long-term debt		391,973			386,741

Total liabilities		1,338,926			1,382,939

Minority interests		52,059			50,422
Commitments and contingencies
Stockholders’ equity:
Capital stock:
Preferred stock		—			—
Common stock, par value $0.01 per share and $5.00 per share:
authorized 200,000,000 shares; issued 64,530,332 shares; outstanding 59,762,595 and 58,130,723 shares		645			322,652
Additional paid-in capital		341,175			14,813
Accumulated other comprehensive income		27,374			24,594
Unearned stock compensation		—			(5,901	)
Retained earnings		787,041			644,319

		1,156,235			1,000,477

Less treasury stock:
4,767,737 and 6,399,609 shares at cost		(75,850	)		(100,916	)

Total stockholders’ equity		1,080,385			899,561

	$	2,471,370		$	2,332,922

See notes to unaudited condensed consolidated financial statements.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands, except share data)	2006			2005			2006			2005

Net sales	$	1,639,487		$	1,597,313		$	3,285,185		$	3,126,385
Costs and expenses:
Cost of goods sold		1,388,883			1,388,792			2,813,613			2,684,900
Selling, general and administrative expenses		118,623			113,630			225,357			223,435
Interest expense		6,952			8,517			13,876			15,818

		1,514,458			1,510,939			3,052,846			2,924,153

Earnings before income taxes and minority interests		125,029			86,374			232,339			202,232
Income taxes		45,504			31,709			82,945			70,984


Earnings before minority interests		79,525			54,665			149,394			131,248
Minority interests		(578	)		(1,910	)		(333	)		948


Net earnings	$	80,103		$	56,575		$	149,727		$	130,300


Basic earnings per share	$	1.36		$	0.95		$	2.57		$	2.20

Diluted earnings per share	$	1.29		$	0.91		$	2.44		$	2.11


Cash dividends per share	$	0.06		$	0.06		$	0.12		$	0.11


Average basic shares outstanding		58,775,891			59,489,851			58,371,850			59,097,619

Average diluted shares outstanding		61,915,314			62,427,957			61,429,080			61,664,332

See notes to unaudited condensed consolidated financial statements.

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


	Six Months Ended
	February 28,
(in thousands)	2006			2005

Cash Flows From (Used By) Operating Activities:
Net earnings	$	149,727		$	130,300
Adjustments to reconcile net earnings to cash from (used by) operating activities:
Depreciation and amortization		39,678			37,846
Business interruption insurance recovery		—			(4,500	)
Minority interests		(333	)		948
Provision for losses on receivables		1,841			3,012
Share-based compensation		4,424			27
Net gain on sale of assets and other		(1,098	)		(1,027	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(75,138	)		(82,198	)
Accounts receivable sold		—			26,238
Inventories		(57,967	)		(99,255	)
Other assets		(23,577	)		(5,494	)
Accounts payable, accrued expenses, other payables and income taxes		(24,909	)		(50,164	)
Deferred income taxes		(635	)		(30	)
Other long-term liabilities		13,062			8,993

Net Cash Flows From (Used By) Operating Activities		25,075			(35,304	)

Cash Flows From (Used By) Investing Activities:
Purchases of property, plant and equipment		(59,460	)		(40,141	)
Sales of property, plant and equipment		3,672			2,598
Acquisitions of fabrication businesses		(5,140	)		(2,950	)

Net Cash Used By Investing Activities		(60,928	)		(40,493	)

Cash Flows From (Used By) Financing Activities:
Increase (Decrease) in documentary letters of credit		(40,877	)		26,207
Payments on trade financing arrangements		(1,667	)		(11,378	)
Short-term borrowings, net change		—			9,583
Payments on long-term debt		—			(423	)
Proceeds from issuance of long-term debt		6,040			—
Stock issued under incentive and purchase plans		21,172			14,121
Dividends paid		(7,005	)		(6,519	)
Tax benefits from stock plans		9,726			8,168

Net Cash From (Used By) Financing Activities		(12,611	)		39,759
Effect of Exchange Rate Changes on Cash		1,171			1,654

Decrease in Cash and Cash Equivalents		(47,293	)		(34,384	)
Cash and Cash Equivalents at Beginning of Year		119,404			123,559

Cash and Cash Equivalents at End of Period	$	72,111		$	89,175

See notes to unaudited condensed consolidated financial statements.

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


	Common Stock								Accumulated									Treasury Stock
						Additional			Other			Unearned
	Number of					Paid-In			Comprehensive			Stock			Retained			Number of
(in thousands, except share data)	Shares		Amount			Capital			Income			Compensation			Earnings			Shares			Amount			Total

Balance, September 1, 2005		64,530,332	$	322,652		$	14,813		$	24,594		$	(5,901	)	$	644,319			(6,399,609	)	$	(100,916	)	$	899,561

Comprehensive income:
Net earnings for six months ended February 28, 2006																149,727									149,727
Other comprehensive income (loss):
Foreign currency translation adjustment, net of taxes of $528										2,964															2,964
Unrealized 1oss on hedges, net of taxes of $(62)										(184	)														(184	)

Comprehensive income																									152,507

Cash dividends																(7,005	)								(7,005	)
Change in par value of common stock				(322,007	)		322,007																		—
Restricted stock grant							(253	)											16,000			253			—
Stock issued under incentive and purchase plans							(3,738	)											1,622,072			24,910			21,172
Stock-based compensation							(1,380	)					5,901						(6,200	)		(97	)		4,424
Tax benefits from stock plans							9,726																		9,726

Balance, February 28, 2006		64,530,332	$	645		$	341,175		$	27,374		$	—		$	787,041			(4,767,737	)	$	(75,850	)	$	1,080,385

See notes to unaudited condensed consolidated financial statements.

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

NOTE A – QUARTERLY FINANCIAL DATA

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The basis is consistent with that used in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for the year ended August 31, 2005 (with the exception of the Company’s adoption of Financial Accounting Standards Board (FASB) Statement No.123R, Share-Based Payment (123(R)) as described below). They include all normal recurring adjustments necessary to present fairly the condensed consolidated balance sheets and statements of earnings, cash flows and stockholders’ equity for the periods indicated. These Notes should be read in conjunction with such Form 10-K. The results of operations for the three and six month periods are not necessarily indicative of the results to be expected for a full year.

NOTE B – ACCOUNTING POLICIES

Stock-Based Compensation

See Note 9, Capital Stock, to the Company’s consolidated financial statements for the year ended August 31, 2005 filed on Form 10-K with the SEC for a description of the Company’s stock incentive plans.

In December 2004, the FASB issued 123(R), requiring that the compensation cost relating to share-based compensation transactions be recognized at fair value in financial statements. The Company adopted 123(R) effective September 1, 2005 using the modified prospective method. As a result, compensation expense was recorded for the unvested portion of previously issued awards that were outstanding at September 1, 2005. The Black-Scholes pricing model was used to calculate total compensation cost which is amortized on a straight-line basis over the remaining vesting period of previously issued awards. (See Note 1, Summary of Significant Accounting Policies, to the Company’s consolidated financial statements for the year ended August 31, 2005 for the assumptions used to estimate the fair value and the weighted average grant date fair value. The Company developed its volatility assumption based on historical data). The Company recognized pre-tax stock-based compensation expense of $2.5 million ($.03 per diluted share) and $4.4 million ($.05 per diluted share) as a component of selling, general and administrative expenses for the three and six months ended February 28, 2006, respectively. The cumulative effect of adoption (primarily arising from the recognition of anticipated forfeitures) was not material. At February 28, 2006, the Company had $5.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the next 28 months.

Prior to the adoption of 123(R), the Company accounted for stock options and stock appreciation rights (SARs) granted to employees and directors using the intrinsic value-based method of accounting. If the Company had used the fair value-based method of accounting, net earnings and earnings per share for the three and six months ended February 28, 2005 would have been adjusted to the pro forma amounts listed in the table below.


	Three Months Ended			Six Months Ended
	February 28,			February 28,
(in thousands, except share data)	2005			2005

Net earnings, as reported	$	56,575		$	130,300
Add: Stock-based compensation expense recognized		18			18
Less: Pro forma stock-based compensation cost		(602	)		(1,256	)

Net earnings — pro forma	$	55,991		$	129,062


Net earnings per share, as reported:
Basic	$	0.95		$	2.20
Diluted	$	0.91		$	2.11
Net earnings per share — pro forma:
Basic	$	0.94		$	2.18
Diluted	$	0.90		$	2.09

Combined information for shares subject to options and SARs for the six months ended February 28, 2006 was as follows:

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


				Weighted
				Average		Price
				Exercise		Range
	Number			Price		Per Share

August 31, 2005
Outstanding		5,374,129		$	11.64	$	5.48-$27.16
Exercisable		3,979,879			9.08		5.48- 27.16

Granted		—			—		— - —
Exercised		(1,001,777	)		8.58		5.88- 15.56
Forfeited		(31,400	)		19.31		15.56- 24.62


February 28, 2006
Outstanding		4,340,952			12.29		5.48-27.16
Exercisable		3,005,002			9.31		5.48-27.16

Share information for options and SARs at February 28, 2006:


Outstanding							Exercisable
			Weighted
			Average		Weighted				Weighted
Range of			Remaining		Average				Average
Exercise	Number		Contractual		Exercise		Number		Exercise
Price	Outstanding		Life (Yrs.)		Price		Outstanding		Price

$5.48- 7.98		1,626,022		2.7	$	6.97		1,626,022	$	6.97
$8.58-10.71		710,314		2.9		8.66		710,314		8.66
15.05-15.56		1,489,121		5.0		15.54		659,421		15.52
24.62-27.16		515,495		6.4		24.66		9,245		26.88

$5.48-27.16		4,340,952		4.0	$	12.29		3,005,002	$	9.31

Of the Company’s previously granted restricted stock awards, 8,000 shares vested during the six months ended February 28, 2006.

Intangible Assets

The total gross carrying amounts of the Company’s intangible assets that were subject to amortization were $17.8 million and $15.7 million at February 28, 2006 and August 31, 2005, respectively. Aggregate amortization expense for the three months ended February 28, 2006 and 2005 was $660 thousand and $409 thousand, respectively. Aggregate amortization expense for each of the six months ended February 28, 2006 and 2005 was $1.1 million.

Inventory Costs

In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, Inventory Costs, which specifies that certain abnormal costs must be recognized as current period charges. The Company adopted this Statement, which is effective for inventory costs incurred after September 1, 2005, and it did not materially affect the Company’s results of operations or financial position as of and for the three and six months ended February 28, 2006.

Asset Retirement Obligations

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143 (FIN 47). FIN 47 clarifies that an asset retirement obligation for which the timing and (or) the method of settlement are conditional on a future event that may or may not be within the Company’s control must be recognized as a liability incurred or acquired if it can be reasonably estimated. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset

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

retirement obligation. The Company adopted FIN 47 effective September 1, 2005 and its adoption did not materially impact the Company’s financial position as of February 28, 2006 or its results of operations for the three or six months then ended.

NOTE C – ACQUISITIONS

On November 14, 2005, the Company acquired substantially all of the operating assets of Hall-Hodges Company, a reinforcing steel fabricator in Norfolk, Virginia for $5.1 million cash and a note payable of $300 thousand. The acquisition is expected to strengthen the Company’s presence and improve its opportunity to grow in the eastern Virginia area. The following summarizes the allocation of the purchase price (subject to change following management’s evaluation of fair value assumptions).


(in thousands)

Inventories	$	1,659
Property, plant and equipment		2,635
Intangible assets		1,177
Liabilities		(31	)

	$	5,440

The pro forma impact from this acquisition on consolidated net earnings would not have been materially different than reported.

NOTE D – SALES OF ACCOUNTS RECEIVABLE

The Company has an accounts receivable securitization program which it utilizes as a cost-effective, short-term financing alternative. Under this program, the Company and several of its subsidiaries periodically sell certain eligible trade accounts receivable to the Company’s wholly-owned consolidated special purpose subsidiary (CMCRV). CMCRV is structured to be a bankruptcy-remote entity. CMCRV, in turn, sells undivided percentage ownership interests in the pool of receivables to affiliates of two third-party financial institutions. CMCRV may sell undivided interests of up to $130 million, depending on the Company’s level of financing needs.

At February 28, 2006 and August 31, 2005, accounts receivable of $291 million and $275 million, respectively, had been sold to CMCRV. The Company’s undivided interest in these receivables (representing the Company’s retained interest) was 97% and 100% at February 28, 2006 and August 31, 2005, respectively. At February 28, 2006, the financial institution buyers owned $10 million in undivided interests in CMCRV’s accounts receivable pool, which was reflected as a reduction in accounts receivable on the Company’s condensed consolidated balance sheets. The average monthly amount of undivided interests owned by the financial institution buyers was $1.7 million and $37.3 million for the six months ended February 28, 2006 and 2005, respectively.

In addition to the securitization program described above, the Company’s international subsidiaries periodically sell accounts receivable without recourse. Uncollected accounts receivable that had been sold under these arrangements and removed from the condensed consolidated balance sheets were $48.0 million and $63.2 million at February 28, 2006 and August 31, 2005, respectively. The average monthly amounts of outstanding international accounts receivable sold were $57.8 million and $60.9 million for the six months ended February 28, 2006 and 2005, respectively.

Discounts (losses) on domestic and international sales of accounts receivable were $797 thousand and $1.0 million for the three months ended February 28, 2006 and 2005, respectively. For the six months ended February 28, 2006 and 2005, these discounts were $1.6 million and $1.8 million, respectively. These losses primarily represented the costs of funds and were included in selling, general and administrative expenses.

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

NOTE E – INVENTORIES

Before deduction of last-in, first-out (LIFO) inventory valuation reserves of $129.1 million and $111.4 million at February 28, 2006 and August 31, 2005, respectively, inventories valued under the first-in, first-out method approximated replacement cost. The majority of the Company’s inventories are in finished goods, with minimal work in process. Approximately $45.7 million and $39.9 million were in raw materials at February 28, 2006 and August 31, 2005, respectively.

NOTE F – CREDIT ARRANGEMENTS

At February 28, 2006 and August 31, 2005, no borrowings were outstanding under the Company’s commercial paper program or the related revolving credit agreement. The Company was in compliance with all covenants at February 28, 2006.

The Company has numerous informal credit facilities available from domestic and international banks. These credit facilities are available to support documentary letters of credit (including those with extended terms), foreign exchange transactions and, in certain instances, short-term working capital loans and are priced at bankers’ acceptance rates or on a cost of funds basis. Amounts outstanding on these facilities relate to accounts payable settled under documentary letters of credit.

Long-term debt was as follows:


	February 28,		August 31,
(in thousands)	2006		2005

6.80% notes due 2007	$	50,000	$	50,000
6.75% notes due 2009		100,000		100,000
CMCZ term note due 2009		35,489		39,773
5.625% notes due 2013		200,000		200,000
Other, including equipment notes		16,227		4,191

		401,716		393,964
Less current maturities		9,743		7,223

	$	391,973	$	386,741

Interest on CMCZ’s term note is accrued at the Warsaw Interbank Offered Rate (WIBOR) plus 1.25% and was fixed at 5.55% for the three months ended March 29, 2006. The term note has scheduled semi-annual payments beginning in September 2005 and is collateralized by CMCZ’s property, plant and equipment. CMCZ’s revolving credit facility with maximum borrowings of 120 million PLN ($37.9 million) expired March 2, 2006. At February 28, 2006, no amounts were outstanding under this facility. The term note and the revolving credit facility contain certain financial covenants for CMCZ. CMCZ was in compliance with these covenants at February 28, 2006. There are no guarantees by the Company of CMCZ’s debt.

CMC – Poland, a wholly-owned subsidiary of CMC, owns and operates equipment at the CMCZ mill site. In connection with the equipment purchase, CMC – Poland issued equipment notes under a term agreement dated September 2005 with $12.4 million (39.2 million PLN) outstanding at February 28, 2006. Installment payments under these notes are due from 2006 through 2010. Interest rates are variable based on the Poland Monetary Policy Council’s rediscount rate, plus an applicable margin. The weighted average rate as of February 28, 2006 was 4.14%. The notes are substantially secured by the shredder equipment.

Interest of $14.8 million and $16.0 million was paid in the six months ended February 28, 2006 and 2005, respectively.

NOTE G – INCOME TAXES

The Company paid $74.1 million and $43.0 million in income taxes during the six months ended February 28, 2006 and 2005, respectively.

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

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


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands, except share data)	2006			2005			2006			2005

Statutory rate		35.0	%		35.0	%		35.0	%		35.0	%
State and local taxes		1.4			2.6			1.3			2.1
Extraterritorial Income Exclusion (ETI)		(.2	)		(0.3	)		(.2	)		(0.4	)
Foreign rate differential		.4			(1.2	)		(.2	)		(2.2	)
Domestic production activity deduction		(.5	)		—			(.5	)		—
Other		.3			0.6			.3			0.6

Effective rate		36.4	%		36.7	%		35.7	%		35.1	%

The American Jobs Creation Act of 2004 (AJCA) would allow the Company a one-time opportunity to repatriate undistributed foreign earnings through its fiscal year ended August 31, 2006 at a 5.25% tax rate (without consideration of possible foreign withholding taxes) rather than the normal U.S. tax rate of 35%, provided that certain criteria, including qualified U.S. reinvestment, are met. Available tax credits related to the repatriation would be reduced under provisions of the AJCA. Based on analysis to date, it is reasonably possible that the Company may repatriate some amount up to $19 million, with the respective U.S. tax liability ranging up to $1.6 million for which the Company has recorded $3.3 million of deferred taxes. The Company’s analysis was based on the statute as currently enacted. Technical corrections, clarifications and regulations related to the statute could impact the Company’s estimate of the tax liability associated with the repatriation.

NOTE H – STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE

On January 26, 2006 the shareholders of the Company voted to increase the authorized shares of common stock from 100,000,000 to 200,000,000 shares. The shareholders also voted to change the par value of the Company’s common stock from $5.00 to $.01 per share. As a result, $322 million was transferred from common stock to additional paid in capital.

In calculating earnings per share, there were no adjustments to net earnings to arrive at earnings for the three or six months ended February 28, 2006 or 2005. The reconciliation of the denominators of the earnings per share calculations is as follows:


	Three Months Ended				Six Months Ended
	February 28,				February 28,
	2006		2005		2006		2005

Average shares outstanding for basic earnings per share		58,775,891		59,489,851		58,371,850		59,097,619
Effect of dilutive securities-stock based incentive/purchase plans		3,139,423		2,938,106		3,057,230		2,566,713

Average shares outstanding for diluted earnings per share		61,915,314		62,427,957		61,429,080		61,664,332

Restricted stock with total share commitments of 16,000 were anti-dilutive at February 28, 2006 based on the average share price for the quarter of $41.32. All of the Company’s outstanding stock options and restricted stock with total share commitments of 5,504,039 at February 28, 2005, were dilutive based on the average share price for the quarter then ended of $27.91. All stock options and Stock Appreciation Rights (SARs) expire by 2012.

The Company’s restricted stock is included in the number of shares of common stock issued and outstanding, but omitted from the basic earnings per share calculation until the shares vest as required by Financial Accounting Standards.

At February 28, 2006, the Company had authorization to purchase 905,500 of its common shares.

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

NOTE I – DERIVATIVES AND RISK MANAGEMENT

The Company’s worldwide operations and product lines expose it to risks from fluctuations in foreign currency exchange rates and metals commodity prices. The objective of the Company’s risk management program is to mitigate these risks using futures or forward contracts (derivative instruments). The Company enters into metal commodity forward contracts to mitigate the risk of unanticipated changes in gross margin due to the volatility of the commodities’ prices, and enters into foreign currency forward contracts, which match the expected settlements for purchases and sales denominated in foreign currencies. Also, when its sales commitments to customers include a fixed price freight component, the Company occasionally enters into freight forward contracts to minimize the effect of the volatility of ocean freight rates. The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in an immaterial amount of ineffectiveness in the statements of earnings and there were no components excluded from the assessment of hedge effectiveness for the three or six months ended February 28, 2006 and 2005. 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 chart shows the impact on the condensed consolidated statements of earnings of the changes in fair value of these economic hedges:


	Three Months Ended					Six Months Ended
	February 28,					February 28,
	2006			2005		2006			2005
(in thousands)	Earnings (Expense)					Earnings (Expense)

Net sales (foreign currency instruments)	$	(180	)	$	965	$	(87	)	$	(1,262	)
Cost of goods sold (commodity instruments)		1,926			555		49			(1,078	)

The Company’s derivative instruments were recorded as follows on the condensed consolidated balance sheets:


	February 28,		August 31,
(in thousands)	2006		2005

Derivative assets (other current assets)	$	4,575	$	2,563
Derivative liabilities (other payables)		4,358		2,151

The following table summarizes activities in other comprehensive income (losses) related to derivatives classified as cash flow hedges held by the Company during the six months ended February 28, 2006 (in thousands):



Change in market value (net of taxes)	$	(128	)
(Gains) losses reclassified into net earnings, net		(56	)

Other comprehensive loss — unrealized loss on derivatives	$	(184	)

During the twelve months following February 28, 2006, negligible losses related to commodity hedges and capital expenditures are anticipated to be reclassified into net earnings as the related transactions mature and the assets are placed into service, respectively. Also, an additional $112 thousand in gains will be reclassified as interest expense related to an interest rate swap.

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

NOTE J – CONTINGENCIES

See Note 11, Commitments and Contingencies, to the consolidated financial statements for the year ended August 31, 2005 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

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

that adequate provision has been made in the condensed consolidated financial statements for the potential impact of these issues, and that the outcomes will not significantly impact the results of operations or the financial position of the Company, although they may have a material impact on earnings for a particular quarter.

NOTE K – BUSINESS SEGMENTS

The Company has refined its method of overhead allocation. Prior year period overhead costs of $3.2 million and $6.5 million for the three and six months ended February 28, 2005, respectively, were reclassified from the domestic mills to the domestic fabrication segment to ensure comparability with current year amounts reported.

The following is a summary of certain financial information by reportable segment:


	Three Months Ended February 28, 2006
										Marketing
	Domestic					Domestic				and
(in thousands)	Mills		CMCZ			Fabrication		Recycling		Distribution		Corporate			Eliminations			Consolidated

Net sales–unaffiliated customers	$	257,109	$	106,782		$	408,005	$	245,894	$	619,285	$	2,412		$	—		$	1,639,487
Intersegment sales		109,061		5,802			151		26,119		22,899		—			(164,032	)		—

Net sales		366,170		112,584			408,156		272,013		642,184		2,412			(164,032	)	$	1,639,487


Adjusted operating profit (loss)		70,767		(584	)		38,494		18,592		12,934		(7,425	)		—			132,778


	Three Months Ended February 28, 2005
										Marketing
	Domestic					Domestic				and
(in thousands)	Mills		CMCZ			Fabrication		Recycling		Distribution		Corporate			Eliminations			Consolidated

Net sales–unaffiliated customers	$	222,701	$	105,082		$	330,744	$	200,776	$	734,674	$	3,336		$	—		$	1,597,313
Intersegment sales		61,134		2,562			142		23,734		14,330		—			(101,902	)		—

Net sales		283,835		107,644			330,886		224,510		749,004		3,336			(101,902	)		1,597,313


Adjusted operating profit (loss)		39,248		(4,542	)		21,372		20,073		23,215		(3,465	)		—			95,901


	Six Months Ended February 28, 2006
									Marketing
	Domestic				Domestic				and
(in thousands)	Mills		CMCZ		Fabrication		Recycling		Distribution		Corporate			Eliminations			Consolidated

Net sales–unaffiliated customers	$	525,781	$	213,662	$	808,074	$	459,100	$	1,274,454	$	4,114		$	—		$	3,285,185
Intersegment sales		210,168		6,254		605		49,312		52,288		—			(318,627	)		—

Net sales		735,949		219,916		808,679		508,412		1,326,742		4,114			(318,627	)		3,285,185


Adjusted operating profit (loss)		135,686		948		56,691		32,426		35,989		(13,952	)		—			247,788

Goodwill – February 28, 2006		306		—		27,006		3,230		—		—			—			30,542
Total Assets – February 28, 2006		471,375		274,976		636,329		193,379		800,430		94,881			—			2,471,370


	Six Months Ended February 28, 2005
									Marketing
	Domestic				Domestic				and
(in thousands)	Mills		CMCZ		Fabrication		Recycling		Distribution		Corporate			Eliminations			Consolidated

Net sales–unaffiliated customers	$	462,534	$	225,236	$	657,202	$	405,138	$	1,372,907	$	3,368		$	—		$	3,126,385
Intersegment sales		137,063		5,522		324		39,842		56,692		—			(239,443	)		—

Net sales		599,597		230,758		657,526		444,980		1,429,599		3,368			(239,443	)		3,126,385


Adjusted operating profit (loss)		93,189		7,773		42,706		39,848		46,584		(10,268	)		—			219,832

Goodwill – February 28, 2005		306		—		27,006		3,230		—		—			—			30,542
Total Assets – February 28, 2005		443,422		311,587		548,222		142,721		674,060		84,344			—			2,204,356

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

The following table provides a reconciliation of consolidated adjusted operating profit to net earnings:


	Three Months Ended						Six Months Ended
	February 28,						February 28,
(in thousands)	2006			2005			2006			2005

Net earnings	$	80,103		$	56,575		$	149,727		$	130,300
Minority interests		(578	)		(1,910	)		(333	)		948
Income taxes		45,504			31,709			82,945			70,984
Interest expense		6,952			8,517			13,876			15,818
Discounts on sales of accounts receivable		797			1,010			1,573			1,782

Adjusted operating profit	$	132,778		$	95,901		$	247,788		$	219,832

The following presents external net sales by major product and geographic area for the Company:


	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2006		2005		2006		2005

Major product information:
Steel products	$	961,749	$	1,011,617	$	1,922,258	$	2,031,122
Ferrous scrap		82,655		88,057		163,024		186,450
Nonferrous scrap		161,973		109,830		293,519		214,513
Nonferrous products		135,111		114,878		259,900		221,015
Industrial materials		200,840		208,048		445,037		348,761
Construction materials		86,150		42,070		178,165		88,032
Other		11,009		22,813		23,282		36,492

Net sales	$	1,639,487	$	1,597,313	$	3,285,185	$	3,126,385


	Three Months Ended				Six Months Ended
	February 28,				February 28,
(in thousands)	2006		2005		2006		2005

Geographic area:
United States	$	1,059,997	$	939,710	$	2,101,379	$	1,866,262
Europe		255,373		290,387		469,606		583,418
Asia		173,681		221,456		384,222		402,974
Australia/New Zealand		92,958		87,222		217,157		177,553
Other		57,478		58,538		112,821		96,178

Net sales	$	1,639,487	$	1,597,313	$	3,285,185	$	3,126,385

Net sales for Europe and the United States for the three and six months ended February 28, 2005 have been adjusted to properly reflect the net sales in those geographic areas.

NOTE L — RELATED PARTY TRANSACTIONS

One of the Company’s international subsidiaries has an agreement for steel purchases with a key supplier of which the Company owns an 11% interest. The total amounts of purchases from this supplier were $118.4 million and $118.9 million for the six months ended February 28, 2006 and 2005, respectively.


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

This Management’s Discussion and Analysis should be read in conjunction with our Form 10-K filed with the Securities and Exchange Commission (SEC) for the year ended August 31, 2005.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are consistent with the information set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K filed with the SEC for the year ended August 31, 2005 and are, therefore, not presented herein.

CONSOLIDATED RESULTS OF OPERATIONS


	Three Months Ended						Six Months Ended
	February 28,				%		February 28,				%
(in millions)	2006		2005		Change		2006		2005		Change

Net sales	$	1,639.5	$	1,597.3		3	$	3,285.2	$	3,126.4		5
Net earnings		80.1		56.6		42		149.7		130.3		15
EBITDA		153.0		115.5		32		286.2		254.9		12

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


	Three Months Ended							Six Months Ended
	February 28,				%			February 28,				%
(in millions)	2006		2005		Change			2006		2005		Change

Net earnings	$	80.1	$	56.6		42		$	149.7	$	130.3		15
Interest expense		7.0		8.5		(18	)		13.9		15.8		(12	)
Income taxes		45.5		31.7		44			82.9		71.0		17
Depreciation and amortization		20.4		18.7		9			39.7		37.8		5

EBITDA	$	153.0	$	115.5		32		$	286.2	$	254.9		12

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

Overview Strong operating profits were generated in what is typically our weakest quarter and after a period of declining steel prices in many parts of the world. The following financial events were significant during our second quarter ended February 28, 2006:

•

The second quarter adjusted operating profit for our steel minimills was almost 65% greater than a year earlier on the strength of higher selling prices combined with seasonally high finished goods shipments as

			well as a lower average cost for scrap utilized.

	•		The copper tube mill’s $6.1 million adjusted operating profit was substantially above last year’s second quarter.

	•		The CMCZ mill had increased sales and a small adjusted operating loss compared to last year’s second quarter’s significant loss ; however, prices and margins continued to be squeezed.

	•		Profitability in our domestic fabrication segment was a record for a second quarter with total shipments up 23% compared with the prior year’s second quarter and realized selling prices were mostly higher.

	•		The Recycling segment achieved a near record quarter with net sales up 21% and adjusted operating profit off 7% from last year’s record second quarter, marked by record nonferrous price levels.

	•		The marketing and distribution segment’s adjusted operating profit of $12.9 million for the second quarter was significantly below last year’s strong second quarter on lower net sales mostly due to temporary factors.

	•		Effective September 1, 2005, we recognized pre-tax compensation expense of $2.5 million and $4.4 million for the three and six months ended February 28, 2006, respectively, as a result of our adoption of Statement of Financial Accounting Standards No. 123(R). See Note B — Accounting Policies, to the condensed consolidated financial statements.

SEGMENT OPERATING DATA

See Note K — Business Segments, to the condensed consolidated financial statements.

We use adjusted operating profit (loss) to compare and evaluate the financial performance of our segments. Adjusted operating profit is the sum of our earnings before income taxes, minority interests and financing costs. The following tables show our net sales and adjusted operating profit (loss) by business segment:


	Three Months Ended									Six Months Ended
	February 28,						%			February 28,						%
(in millions)	2006			2005			Change			2006			2005			Change

NET SALES:

Domestic mills	$	366,170		$	283,835			29		$	735,949		$	599,597			23
CMCZ*		112,584			107,644			5			219,916			230,758			(5	)
Domestic fabrication		408,156			330,886			23			808,679			657,526			23
Recycling		272,013			224,510			21			508,412			444,980			14
Marketing and distribution		642,184			749,004			(14	)		1,326,742			1,429,599			(7	)
Corporate and eliminations		(161,620	)		(98,566	)		(64	)		(314,513	)		(236,075	)		(33	)

	$	1,639,487		$	1,597,313			3		$	3,285,185		$	3,126,385			5


*		Before minority interests


	Three Months Ended									Six Months Ended
	February 28,						%			February 28,						%
(in millions)	2006			2005			Change			2006			2005			Change

ADJUSTED OPERATING PROFIT (LOSS):

Domestic mills	$	70,767		$	39,248			80		$	135,686		$	93,189			46
CMCZ*		(584	)		(4,542	)		87			948			7,773			(88	)
Domestic fabrication		38,494			21,372			80			56,691			42,706			33
Recycling		18,592			20,073			(7	)		32,426			39,848			(19	)
Marketing and distribution		12,934			23,215			(44	)		35,989			46,584			(23	)
Corporate and eliminations		(7,425	)		(3,465	)		(114	)		(13,952	)		(10,268	)		(36	)


*		Before minority interests

Domestic Mills We include our four domestic steel and our copper tube minimills in our domestic mills segment. Adjusted operating profit was higher due to higher selling prices, higher tons shipped and relatively stable scrap prices. Increases in metal margin (our average selling price less our average cost of scrap used in production) of

11% and 9% for the three and six months ended February 28, 2006, respectively, more than offset an increase of 46%in energy costs.

Selling prices for our domestic steel minimills increased for the three and six months ended February 28, 2006 as compared to 2005 due to strong domestic demand for steel. Our average total mill selling price for the second quarter was $26 per ton above last year’s level. By product line, the price premium of merchant bar over reinforcing bar remained relatively wide at $88 per ton.

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


	Three Months Ended				Increase						Six Months Ended				Increase
	February 28,				(Decrease)						February 28,				(Decrease)
	2006		2005		$			%			2006		2005		$			%

Average mill selling price (finished goods)	$	516	$	490	$	26			5		$	513	$	494	$	19			4
Average mill selling price (total sales)		500		474		26			5			495		479		16			3
Average ferrous scrap production cost		207		210		(3	)		(1	)		205		212		(7	)		(3	)
Average metal margin		293		264		29			11			290		267		23			9
Average ferrous scrap purchase price		184		181		3			2			184		185		(1	)		(1	)

Our mills’ shipments increased for the three and six months ended February 28, 2006 as compared to 2005 due to increased orders from distributor and end-user customers with strong demand and lower inventories. The table below reflects our domestic steel minimills’ operating statistics (short tons in thousands):


	Three Months Ended				Increase				Six Months Ended				Increase
	February 28				(Decrease)				February 28,				(Decrease)
	2006		2005		Amount		%		2006		2005		Amount		%

Tons melted		577		535		42		8		1,151		1,084		67		6
Tons rolled		532		472		60		13		1,054		1,019		35		3
Tons shipped		603		506		97		19		1,227		1,051		176		17

All of our domestic steel minimills were more profitable for the three and six months ended February 28, 2006 as compared to 2005. All of the domestic steel mills also reported higher tons shipped for the three and six months ended 2006 as compared to 2005 and the selling prices at all the domestic steel mills were higher for the same periods in 2006 except for Alabama where the selling prices dropped slightly. During the three months ended February 28, 2005 the domestic steel mills reported a $4.5 million gain from a business interruption insurance recovery and during the prior year six month period, they recorded a $3.9 million gain from a business interruption insurance recovery.

Overall our domestic steel mills had pretax LIFO income (LIFO income or expense amounts in the segment operating data are pretax) of $1.0 million during the three months and LIFO expense of $7.2 million for the six months ended February 28, 2006 as compared to $.1 million LIFO income and $26.0 million LIFO expense for the three and six months ended February 28, 2005, respectively. Our total utility costs increased by $8.7 million and $16.4 million (46%) for the three and six months ended February 28, 2006, respectively, as compared to 2005.

The table below reflects our copper tube minimill’s prices per pound and operating statistics:


	Three Months Ended				Increase						Six Months Ended				Increase
	February 28,				(Decrease)						February 28,				(Decrease)
	2006		2005		Amount			%			2006		2005		Amount			%

Pounds shipped (in millions)		15.7		16.0		(.3	)		(2	)		31.9		32.1		(.2	)		(1	)
Pounds produced (in millions)		16.7		16.4		.3			2			32.6		32.3		.3			1
Average selling price	$	2.84	$	1.89	$	.95			50		$	2.63	$	1.86	$	.77			41
Average copper scrap production cost	$	1.73	$	1.21	$	.52			43		$	1.62	$	1.21	$	.41			34
Average metal margin	$	1.11	$	0.68	$	.43			63		$	1.01	$	0.65	$	.36			55
Average copper scrap purchase price	$	2.02	$	1.34	$	.68			51		$	1.87	$	1.31	$	.56			43

Our copper tube minimill’s adjusted operating profit was $6.1 million and $10.3 million for the three and six months ended February 28, 2006, respectively, as compared to $967 thousand and $3.2 million, respectively, in 2005. Demand from our commercial and residential end-users was relatively steady. Better supply/demand conditions in the industry resulted in an increased average selling price for the second quarter of $2.84 per pound and metal spreads widened to $1.11 per pound, up from 68 cents, more than offsetting the pronounced rise in the cost of scrap. Pounds shipped were down 2% and 1% for the three and six months ended February 28, 2006, respectively, as compared to 2005. Our copper tube mill recorded $1.7 million and $3.2 million LIFO expense for the three and six months ended February 28, 2006 as compared to $1.0 million and $2.0 million LIFO expense in 2005, respectively.

CMCZ Even though tons shipped in the second quarter of 2006 increased substantially compared to 2005, net sales remained relatively flat due to lower selling prices. The change in foreign currency exchange rates decreased net sales by $6.0 million and increased $4.4 million for the three and six months ended February 28, 2006, respectively, as compared to 2005. CMCZ reported an adjusted operating loss of $0.6 million and an adjusted operating profit of $0.9 million for the three and six months ended February 28, 2006 as compared to an adjusted operating loss of $4.5 million and a $7.8 million adjusted operating profit in 2005, respectively. The following table reflects CMCZ’s operating statistics and average prices per short ton:


	Three Months Ended						Increase						Six Months Ended						Increase
	February 28,						(Decrease)						February 28,						(Decrease)
	2006			2005			Amount			%			2006			2005			Amount			%

Tons melted (thousands)		285			203			82			40			570			531			39			7
Tons rolled (thousands)		261			206			55			27			498			408			90			22
Tons shipped (thousands)		285			208			77			37			542			460			82			18

Average mill selling price (total sales)		1,238	PLN		1,523	PLN		(285	)		(19	)		1,269	PLN		1,602	PLN		(333	)		(21	)
Average ferrous scrap production cost		692	PLN		904	PLN		(212	)		(23	)		683	PLN		944	PLN		(261	)		(28	)
Average metal margin		546	PLN		619	PLN		(73	)		(12	)		586	PLN		658	PLN		(72	)		(11	)
Average ferrous scrap purchase price		580	PLN		641	PLN		(61	)		(10	)		575	PLN		753	PLN		(178	)		(24	)
Average mill selling price (total sales)	$	381		$	494		$	(113	)		(23	)	$	389		$	481		$	(92	)		(19	)
Average ferrous scrap production cost	$	213		$	293		$	(80	)		(27	)	$	206		$	284		$	(78	)		(27	)
Average metal margin	$	168		$	201		$	(33	)		(16	)	$	183		$	197		$	(14	)		(7	)
Average ferrous scrap purchase price	$	179		$	207		$	(28	)		(14	)	$	176		$	227		$	(51	)		(22	)

Selling prices and metal margins decreased significantly in 2006 as compared to 2005. Our selling prices for wire rod were particularly weak in 2006 as compared to 2005 due to world-wide excess supply. Tons melted and rolled increased in 2006 as compared to 2005 as the mill entered this year’s winter months with much stricter inventory control. The change in foreign currency exchange rates had minimal impact on our adjusted operating profit for 2006 as compared to 2005 though the continued strong zloty limited export opportunities.

Domestic Fabrication Our domestic fabrication plants’ shipments and average selling prices per ton were as follows:


	Three Months Ended				Increase				Six Months Ended				Increase
	February 28,				(Decrease)				February 28,				(Decrease)
	2006		2005		Amount		%		2006		2005		Amount		%

Tons shipped (in thousands)		363		296		67		23		726		624		102		16
Average selling price*	$	871	$	849	$	22		3	$	857	$	835	$	22		3


*excluding stock and buyout sales

We recorded $9.7 million of LIFO income and $4.2 million of LIFO expense in our domestic fabrication segment for the three and six months ended February 28, 2006 as compared to $4.6 million and $9.2 million LIFO expense in 2005, respectively. Overall, market conditions were excellent in all areas, enabling us to obtain higher selling prices and increase overall shipments to meet demand. All operating locations were profitable as the domestic construction markets remained vibrant. The three hurricanes in the U.S. Gulf coast region had minimal disruption on our operations.

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


	Three Months Ended				Increase						Six Months Ended				Increase
	February 28,				(Decrease)						February 28,				(Decrease)
	2006		2005		Amount			%			2006		2005		Amount			%

Ferrous sales price	$	190	$	197	$	(7	)		(4	)	$	192	$	209	$	(17	)		(8	)
Nonferrous sales price	$	2,133	$	1,609	$	524			33		$	1,981	$	1,561	$	420			27
Ferrous tons shipped		490		463		27			6			957		933		24			3
Nonferrous tons shipped		74		72		2			3			144		139		5			4
Total volume processed and shipped*		862		822		40			5			1,701		1,650		51			3


*Includes our processing plants affiliated with our domestic steel mills.

The ferrous scrap market was still strong with continued volatility though not with the extremes seen in earlier months. Demand remained strong as domestic electric arc furnances operated at near capacity. Copper and aluminum prices exhibited greater swings than past quarters but the net upward trend resulted in greater profitability. Total volume of scrap processed increased in 2006 compared to 2005 and inventory turnover across the board remained extremely rapid. Our LIFO expense was $3.2 million and $4.6 million for the three and six months ended February 28, 2006 as compared to $1.0 million LIFO income and $1.2 million LIFO expense for the same periods in 2005, respectively.

Marketing and Distribution With consideration of lead times for order, production, shipment, and delivery, economic conditions in the previous quarter influenced results in the current quarter. Global steel markets were weak during the later half of calendar 2005 leading to decreased prices and sales this quarter, especially in Europe and Asia, with resulting lower profitability for this large product line. One encouraging development was signs of recovery in Germany with sales of specialty steel products. Our Australian markets, both import marketing and domestic service centers, continued strong. Asian markets exhibited a traditional slow period approaching the lunar New Year but activity began to surge later in the quarter. Sales and margins for industrial materials and products were good but down from recent record levels. The margins for aluminum, copper and stainless steel semis decreased over the prior year as fixed margin contracts were eroded by variable higher freight, insurance, and duty costs. Though metal margins on these sales are hedged, some hedging instruments require mark to market accounting, resulting in gain (loss) recognition ahead of the offsetting underlying physical contract. During the six months ended February 28, 2006 a $3 million loss was recorded on these hedging instruments. We had LIFO expense of $1.8 million and LIFO income of $1.5 million for the three and six months ended February 28, 2006 as compared to LIFO income of $0.5 million and $.02 million for 2005, respectively.

Corporate and Eliminations Our corporate expenses for the three and six months ended February 28, 2006 were higher due to greater eliminations of profit on intercompany sales, lower earnings on investments segregated for our nonqualified retirement plan, higher salaries and the recording of share based compensation.

CONSOLIDATED DATA

On a consolidated basis, the LIFO method of inventory valuation increased our net earnings by $2.6 million and decreased net earnings by $11.5 million (4 cents and (19) cents per diluted share) for the three and six months ended February 28, 2006 as compared to decreasing net earnings by $2.6 million and $24.8 million ((4) cents and (40) cents per diluted share) for 2005, respectively.

Our overall selling, general and administrative expenses increased $5 million and $2 million for the three and six months ended February 28, 2006 as compared to 2005, respectively, because of increases in salary compensation, benefits and professional services offset by lower incentive compensation accruals.

Effective September 1, 2005, we changed our method of accounting for our share-based compensation arrangements when we adopted FASB Statement No. 123 (R) utilizing the modified prospective method (see Note B-Accounting Policies, to the condensed consolidated financial statements). As a result of this adoption, we recorded $2.5 million and $4.4 million for additional compensation costs in selling, general and administrative expenses during the three and six months ended February 28, 2006 as compared to 2005, respectively.

Interest expense for the six months ended February 28, 2006 was $1.9 million less than 2005 due primarily to lower short- and long-term borrowings outstanding.

Our overall effective tax rate for the six months ended February 28, 2006 increased to 35.7% as compared to 35.1% in 2005 due to a shift in profitability from low tax jurisdictions (Poland) to those domestic jurisdictions subject to state taxes. The tax rate for the second quarter 2006 was 36.4% versus 36.7% for 2005.

CONTINGENCIES

See Note J — Contingencies, to the condensed consolidated financial statements.

In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings, governmental investigations including environmental matters, and contract disputes. We may incur settlements, fines, penalties or judgments and otherwise become subject to liability because of some of these matters. While we are unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with these matters, we make accruals as amounts become probable and estimable. 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 financial statements for the estimable potential impact of these contingencies. We also believe that the outcomes will not significantly affect the long-term results of operations, our financial position or cash flows. However, they may have a material impact on earnings 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.

OUTLOOK

During the second quarter of 2006, the global steel market in particular had reversed course, resulting in another price rally. The end of de-stocking in most markets, disciplined production rates by EU mills, and a rapid Asian turnaround all contributed to the upswing. Generally good economic conditions prevail. Manufacturing activity continues to expand. While residential construction in the U.S. has pulled back from its peak, worldwide non-residential construction notably is expected to strengthen. More specifically, construction materials generally are in strong demand. Our domestic steel mill markets continue at relatively strong levels, underpinned by the growing U.S. economy and solid construction markets. Imports of carbon steel bar products recently have increased into the U.S.; although at reasonable levels relative to demand, the situation bears watching. Our mill shipments should accelerate during the third quarter, and steel prices should remain firm. Steel scrap prices remain relatively strong, domestically and internationally, although a continuation of the unprecedented price volatility we have seen in recent quarters appears inevitable. The outlook for nonferrous markets remains favorable, although prices are off from recent highs. Demand for downstream products and services remains vibrant.

Accordingly, total earnings from our domestic steel mills should remain strong during the third quarter. The copper tube business should be steady at the improved level. Results at CMCZ are expected to improve significantly based on increased selling prices and shipments. Our anticipation remains that fabrication profits will expand further, given robust prices and volumes. Our Recycling segment will again post strong results buoyed by relatively firm markets. We expect the Marketing and Distribution segment to pick up again, driven by higher volume and margins in various steel markets, led by firmer market conditions in China.

Overall, we believe product demand should accelerate further, and volume and prices will remain strong. We anticipate third quarter LIFO diluted net earnings per share between $1.25 and $1.40.

LIQUIDITY AND CAPITAL RESOURCES

See Note F — Credit Arrangements, to the condensed consolidated financial statements.

Our sources, facilities and availability of liquidity and capital resources as of February 28, 2006 (dollars in thousands):


	Total
Source	Facility		Availability
Net cash flows from operating activities	$	25,075		N/A
Commercial paper program ^*		400,000	$	372,925
Domestic accounts receivable securitization		130,000		120,000
International accounts receivable sales facilities		85,600		37,600
Bank credit facilities — uncommitted		600,000		350,000
Notes due from 2007 to 2013		350,000		^**
Trade financing arrangements		—	As required
CMCZ revolving credit facility		37,900	Expired March 2006
CMCZ term note due March 2009		35,489		—
CMCZ & CMC — Poland equipment notes		13,024		—


*		The commercial paper program is supported by our $400 million unsecured revolving credit agreement. The availability under the revolving credit agreement is reduced by $27.1 million of stand-by letters of credit issued as of February 28, 2006.

**		With our investment grade credit ratings and current industry conditions we believe we have access to cost-effective public markets for potential refinancing or the issuance of additional long-term debt.

Certain of our financing agreements, both domestically and at CMCZ, include various covenants, of which we were in compliance at February 28, 2006. There are no guarantees by the Company or any of its subsidiaries for any of CMCZ’s debt.

Off-Balance Sheet Arrangements For added flexibility, we may secure financing through securitization and sales of certain accounts receivable both in the U.S. and internationally. See Note D — Sales of Accounts Receivable, to the condensed consolidated financial statements. We may continually sell accounts receivable on an ongoing basis to replace those receivables that have been collected from our customers. Our domestic securitization program contains certain cross-default provisions whereby a termination event could occur should we default under another credit arrangement, and contains covenants that conform to the same requirements contained in our revolving credit agreement.

Cash Flows Our cash flows from operating activities primarily result from sales of steel and related products, and to a lesser extent, sales of nonferrous metal products. We have a diverse and generally stable customer base.

Significant fluctuations in working capital:

	-		Accounts receivable — slower turnover in domestic fabrication, recycling, CMCZ, and marketing and distribution

	-		Inventories — higher in-transit inventory and increased carrying prices

	-		Accrued expenses — annual incentive compensation paid

We expect our total capital spending for fiscal 2006 to be $160 million, including the completion of our shredder in Poland and our continuous caster project at our Texas melt shop. This is down some $18 million from our original budget due to cancellation of some projects, the largest of which was $10 million for the purchase of 100 rail cars. We invested $59.6 million in property, plant and equipment during the first six months of fiscal 2006. We continuously assess our capital spending and reevaluate our requirements based upon current and expected results.

We did not purchase any of our common shares for our treasury during the six months ended February 28, 2006. During the six months ended February 28, 2006, we issued additional long-term debt for our shredder operation in Poland. Our contractual obligations for the next twelve months of $1.8 billion are typically expenditures with normal revenue processing 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, 2006:


	Payments Due By Period*
			Less than						More than
(dollars in thousands)	Total		1 Year		1-3 Years		3-5 Years		5 Years

Contractual Obligations:
Long-term debt ⁽¹⁾	$	401,716	$	9,743	$	180,581	$	11,337	$	200,055
Interest ⁽²⁾		117,741		23,888		40,155		22,744		30,954
Operating leases ⁽³⁾		88,014		19,365		29,815		21,075		17,759
Purchase obligations ⁽⁴⁾		1,182,935		965,443		161,669		18,857		36,966

Total contractual cash obligations	$	1,790,406	$	1,018,439	$	412,220	$	74,013	$	285,734


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

(1)		Total amounts are included in the February 28, 2006 condensed consolidated balance sheet. See Note F, Credit Arrangements,

		to the condensed 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, 2006.

(3)		Includes minimum lease payment obligations for non-cancelable equipment and real-estate leases in effect as of February 28, 2006.

(4)		About 92% 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.

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, 2006, we had committed $31.2 million under these arrangements. All of the commitments expire within one year.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements regarding the outlook for our financial results including net earnings, product pricing and demand, currency valuation, production rates, inventory levels, and general market conditions. These forward-looking statements generally can be identified by phrases such as we “expect,” “anticipate” “believe,” “ought,” “should,” “likely,” “appear,”, “project,” “forecast,” or other similar words or phrases of similar impact. There is inherent risk and uncertainty 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:

	•		interest rate changes,

	•		construction activity,

	•		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,

	•		court decisions,

	•		industry consolidation or changes in production capacity or utilization,

	•		global factors including political and military uncertainties,

	•		credit availability,

	•		currency fluctuations,

	•		energy prices,

	•		decisions by governments impacting the level of steel imports, and

	•		the pace of overall economic activity, particularly China.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required hereunder for the Company is consistent with 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, 2005, filed with the Securities Exchange Commission and is, therefore, not presented herein.

Also, see Note I — Derivatives and Risk Management, to the condensed consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. 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 at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.

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, our 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 for the year ended August 31, 2005, filed November 9, 2005, with the Securities and Exchange Commission.

ITEM 1A. RISK FACTORS

Not Applicable

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

Issuer Purchases of Equity Securities


						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 December 1, 2005								905,500	(1)

December 1— December 31, 2005		240	(2)	$	35.41

January 1 — January 31, 2006		2,096	(2)	$	40.45

February 1 — February 28, 2006		8,533	(2)	$	44.78

As of February 28, 2006		10,869	(2)	$	43.74			905,500	(1)


(1)		Shares available to be purchased under the Company’s Share Repurchase Program publicly announced May 24, 2005.

(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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the registrant’s annual meeting of stockholders held January 26, 2006, the three nominees named in the Proxy Statement dated December 12, 2005, were elected to serve as directors until the 2009 annual meeting. There was no solicitation in opposition to the nominees for directors. Additionally, the proposal to amend the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 100,000,000 to 200,000,000 with no change in the number of authorized shares of preferred stock was approved, and the proposal to amend the Company’s Restated Certificate of Incorporation to decrease the par value of the Company’s common stock from $5.00 per share to $.01 per share was approved. Also, the appointment of Deloitte & Touche LLP as auditors of the registrant for the fiscal year ending August 31, 2006 was ratified.

Of the 58,389,580 shares outstanding on the record date, 52,862,132 were present in person or by proxy constituting approximately 90.5% of the total shares entitled to vote. Information as to the vote on each director standing for election, all matters voted on at the meeting and directors continuing in office is provided below:

Proposal 1 — Election of Directors.


Nominee	For	Withheld
Harold L. Adams	50,577,168	2,284,964
Anthony A. Massaro	50,578,113	2,284,019
Robert D. Neary	50,560,062	2,302,070

Directors continuing in office are:

Moses Feldman
Ralph E. Loewenberg
Dorothy G. Owen
Stanley A. Rabin
J. David Smith
Robert R. Womack

Proposal 2 — Amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 100,000,000 to 200,000,000 with no change in the number of authorized shares of preferred stock.


For:			47,851,823
Against:			4,905,018
Abstentions and broker nonvotes:			105,291

Proposal 3— Amendment to the Company’s Restated Certificate of Incorporation to decrease the par value of the Company’s common stock from $5.00 per share to $.01 per share.


For:			51,757,931
Against:			776,866
Abstentions and broker nonvotes:			327,335

Proposal 4 — Ratification of appointment of Deloitte & Touche LLP as independent auditors for the fiscal year ending August 31, 2006.


For:			51,796,468
Against:			919,449
Abstain			146,215

ITEM 5. OTHER INFORMATION

Executive Employment Continuity Agreement

Effective as of April 5, 2006, the Board of Directors of the Company authorized the execution of a form of Executive Employment Continuity Agreement (the “Agreement”) with certain key executives, including each of the Company’s executive officers with the exception of its Chairman and Chief Executive Officer and President and Chief Operating Officer. The Agreement is intended to ensure that the Company will have the continued attention and dedication of the executive in the event of a Change in Control of the Company (as defined in the Agreement). Should a Change in Control occur, the Company will continue to employ each executive for a period of two years thereafter (the “Employment Period”). All currently employed executive officers who were among the five highest paid executive officers the prior year or anticipated to be this fiscal year (with the exception of the two excluded positions) are expected to enter into the Agreement.

During the Employment Period, each executive will continue to receive (i) an annual base salary equal to at least the executive’s base salary before the Change in Control; (ii) cash bonus opportunities equivalent to that available to the executive under the Company’s annual and long term cash incentive plans in effect immediately preceding the Change in Control; and (iii) continued participation in all incentive, including equity incentive, savings, deferred compensation, retirement plans, welfare benefit plans and other employee benefits on terms no less favorable than those in effect during the 90-day period immediately preceding the Change in Control.

Should the executive’s employment be terminated during the Employment Period for other than cause or disability (including Constructive Termination as defined in the Agreement) the Agreement requires the Company to pay certain severance benefits to the executive. The severance benefits include an amount equal to either three or four times the employee’s highest base salary in effect at any time during the twelve month period prior to the Change in Control as well as unpaid salary, vacation pay and certain other amounts considered to have been earned prior to termination. Company contributions to retirement plans and participation, including that of the executive’s eligible dependents, in Company provided welfare plan benefits will either be continued for two years following termination or their cash equivalent for such period paid to the executive. All un-exercised and un-vested equity incentives including restricted stock awards, stock appreciation rights and stock options previously granted to such executive will become immediately vested and exercisable.

The Agreement requires the Company to determine if the payments to an executive under the Agreement combined with any other payments or benefits to which the executive may be entitled (in aggregate the “Change in Control Payments”) would result in the imposition on the executive of the excise tax under Section 4999 of the Internal Revenue Code. The Agreement does not provide for a “tax gross up” reimbursement payment by the Company to the executive for taxes, including the Section 4999 excise taxes, the employee may owe as a result of receipt of payments under the Agreement. The Company will either reduce the Change in Control Payments to the maximum amount which would not result in imposition of the Section 4099 excise tax or pay the entire Change in Control Payment to the executive if, even after the executive’s payment of the Section 4099 excise tax, the executive would receive a larger net amount.

The Agreement does not provide for any employment or severance benefit prior to an actual or, in some circumstances shortly before, a contemplated Change in Control. In the event the executive is terminated more than two years following a Change in Control no severance benefits are provided under the Agreement. The Agreement provides that the executive not disclose any confidential information relating to the Company and, for a period of one year following termination of employment, not compete with the business as conducted by the Company within 100 miles of a Company facility nor solicit or hire employees of the Company or knowingly permit (to the extent reasonably within the executive’s control) any business or entity that employs the executive or in which the executive has an ownership interest to hire Company employees. If a court rules than the executive has violated these provisions, the rights of the executive under the Agreement will terminate.

The Agreement is in the form attached hereto as Exhibit 10.1.

Stock Ownership Guidelines

Effective as of April 5, 2006, the Board of Directors of the Company approved stock ownership guidelines for directors, all officers and certain designated employees of the Company. Many of those covered by the guidelines presently own Company stock in amounts substantially in excess of these minimum requirements. The Board of Directors believes adoption of minimum ownership levels will serve to further align the interests of those covered by the guidelines with the Company’s stockholders. Under the Company’s stock ownership guidelines the following categories of directors, officers and employees are required to own Company common stock (“Company Common Stock”) with a market value, as determined on January 31 of each year, in the following amounts:

•

Non-employee Directors — five times the annual retainer paid to all non-employee directors

•

Chief Executive Officer — five times base salary

•

President and Chief Operating Officer — four times base salary

•

Most Vice Presidents including the Chief Financial Officer, each Company business segment President and General Counsel — three times base salary

•

Controller, Treasurer and Vice President and Chief Information Officer — two times base salary

•

Other executives as may be designated by the Compensation Committee of the Board of Directors — one times base salary.

All current directors, officers and designated employees must be in compliance with the guidelines by April 5, 2009. Individuals who are elected, hired or promoted into positions covered by the guidelines will have three years after such date to attain the minimum ownership level. Unvested restricted shares of Company Common Stock will be included when determining Company Common Stock ownership, but unexercised options, stock appreciation rights or similar equity incentives, vested or unvested, will not be included.

Lead Director

On February 10, 2006, the Board of Directors of the Company established the position of Lead Director and appointed Anthony A. Massaro to serve as Lead Director. On April 5, 2006, the Board of Directors approved an annual retainer of $10,000 for service as Lead Director, with the first year payment of such retainer to be prorated from February 1, 2006.

ITEM 6. EXHIBITS

Exhibits required by Item 601 of Regulation S-K.

3(i)

Certificate of Amendment of Restated Certificate of Incorporation of Commercial Metals Company dated February 17, 1995 (filed herewith).

10.1		Form of Executive Employment Continuity Agreement (filed herewith).

31.1		Certification of Stanley A. Rabin, Chairman of the Board, President 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, 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 Stanley A. Rabin, Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2		Certification of William B. Larson, Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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

		/s/ William B. Larson

April 7, 2006		William B. Larson
		Vice President
		& Chief Financial Officer

		/s/ Leon K. Rusch

April 7, 2006		Leon K. Rusch
		Controller

EXHIBIT 3(i)

CERTIFICATE OF AMENDMENT

RESTATED CERTIFICATE OF INCORPORATION

COMMERCIAL METALS COMPANY

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

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

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

FOURTH: The aggregate number of shares of capital stock which the corporation shall have authority to issue is Two Hundred Two Million (202,000,000) of which Two Hundred Million (200,000,000) shares shall be Common Stock at the Par Value of One Cent ($.01) per share and Two Million (2,000,000) shares shall be Preferred Stock of the Par Value of One Dollar ($1.00) per share.

SECOND: That thereafter, pursuant to a resolution of the Board of Directors of the Corporation, an annual meeting of stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting necessary number of shares as required by statute were voted in favor of the amendment.

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

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Stanley A. Rabin, its President, and attested by David M. Sudbury, its Secretary this 26 day of January, 2006.


	COMMERCIAL METALS COMPANY
	By:	/s/ Stanley A. Rabin
		Stanley A. Rabin, President

ATTEST:

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

EXHIBIT 10.1

COMMERCIAL METALS COMPANY
EXECUTIVE EMPLOYMENT CONTINUITY AGREEMENT

THIS AGREEMENT, dated as of (the “Agreement Date”), is made by and between COMMERCIAL METALS COMPANY (the “Company”), a Delaware corporation, and (the “Executive”).

ARTICLE I
PURPOSE

The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued services of the Executive, despite the possibility or occurrence of a Change in Control of the Company. The Board believes that this objective may be achieved by giving key management employees assurances of financial security in case of a pending or threatened Change in Control, so that they will not be distracted by personal risks and will continue to devote their full time and best efforts to the performance of their duties. The Company and the Executive enter into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote Executive’s full energy to the Company’s affairs. This Agreement is not intended to provide the Executive with any right to continued employment with the Company, except in the event of a Change in Control of the Company and subject to the provisions of this Agreement. The effect of this Agreement on other agreements and other rights of the Executive is explained in Article IX below.

ARTICLE II
CERTAIN DEFINITIONS

When used in this Agreement, the terms specified below shall have the following meanings:

2.1 “Affiliate” means any corporation or other entity that is directly or indirectly through one or more intermediaries, controlled by the Company.

2.2 “Annual Base Salary” has the meaning set forth in Section 3.2(a).

2.3 “Annual Cash Incentive Plan” means the cash bonus plan as administered by the compensation committee of the Company’s board of directors which establishes the criteria for and amount of annual cash bonus payments for key executives.

2.4 “Auditor” has the meaning set forth in Section 6.1.

2.5 “Benefit Continuation Period” means the period beginning on the Termination Date and ending on the second anniversary of the Termination Date.

2.6 “Benefit Restoration Plan” means the Commercial Metals Companies Benefit Restoration Plan effective September 1, 1995, as amended.

2.7 “Capped Amount” has the meaning set forth in Section 6.1.

2.8 “Cash Bonus Opportunity” has the meaning set forth in Section 3.2(b).

2.9 “Cause” has the meaning set forth in Section 4.3.

2.10 “Change in Control” means any of the following events:

(a) any Person becomes the “beneficial owner” (as defined in Rule 13d-3 or Rule 13d-5 under the Exchange Act), directly or indirectly, of 25% or more of the combined voting power of the Company’s then outstanding voting securities;

(b) the Incumbent Board ceases for any reason to constitute at least the majority of the Board; provided, however, that any person becoming a director subsequent to the Agreement Date whose election, or nomination for election by the Company’s shareholders was approved by a vote of at least 75% of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this subsection (b), considered as though such person were a member of the Incumbent Board;

(c) all or substantially all of the assets of the Company are sold, transferred or conveyed and the transferee of such assets is not controlled by the Company (control meaning the ownership of more than 50% of the combined voting power of such entity’s then outstanding voting securities); or

(d) the Company is reorganized, merged or consolidated, and the shareholders of the Company immediately prior to such reorganization, merger or consolidation own in the aggregate 50% or less of the outstanding voting securities of the surviving or resulting corporation or entity from such reorganization, merger or consolidation.

Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction (i) which results in the Executive or a group of Persons, which includes the Executive, acquiring, directly or indirectly, 25% or more of the combined voting power of the Company’s then outstanding voting securities; or (ii) which results in the Company, any Affiliate or any profit-sharing plan, employee stock ownership plan or employee benefit plan of the Company or any Affiliates (or any trustee of or fiduciary with respect to any such plan acting in such capacity) acquiring, directly or indirectly, 15% or more of the combined voting power of the Company’s then outstanding voting securities. For purposes of this section, the term “Incumbent Board” means the individuals who as of the

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Agreement Date constitute the Board, and the term “Person” means any natural person, firm, corporation, government, governmental agency, association, trust or partnership.

2.11 “Change in Control Arrangements” has the meaning set forth in Section 6.1.

2.12 “Change in Control Payment” has the meaning set forth in Section 6.1.

2.13 “Change in Control Date” means the date on which a Change in Control occurs.

2.14 “Code” means the Internal Revenue Code of 1986, as amended.

2.15 “Constructive Termination” has the meaning set forth in Section 4.4.

2.16 “Disabled” or “Disability” means that the Executive:

(a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company or an Affiliate.

2.17 “Disability Effective Date” has the meaning set forth in Section 4.1.

2.18 “Employment Period” means the period commencing on the Change in Control Date and ending on the second anniversary of the Change in Control Date.

2.19 “Equity Incentive Plans” means the Company’s 1996 Long-Term Stock Incentive Plan, the General Employee Stock Purchase Plan and any other equity incentive plan approved by the Company following the date of this Agreement which is intended to provide a financial incentive to employees of the Company based on the value of or utilizing the Company’s stock whether by means of grants or awards of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance share awards or any other equity based incentives.

2.20 “Excess Change in Control Payment” means the dollar amount of excise tax which the Executive would become obligated to pay pursuant to Code Section 4999 as a result of receipt of any payment from the Company in excess of the Capped Amount.

2.21 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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2.22 “Highest Annual Base Salary” means highest annual base salary paid by the Company or an Affiliate to the Executive for any calendar year during the sixty (60) consecutive month period immediately preceding the Termination Date. For purposes of this determination, annual base salary shall be annualized for any period of less that one complete calendar year.

2.23 “Long-Term Performance Plan” means a cash incentive plan administered by the compensation committee of the Company’s board of directors which provides for cash payments to key employees contingent upon the attainment of multi-year performance goals.

2.24 “Make-Whole Payment” has the meaning set forth in Section 6.4.

2.25 “Payment Date” means the 30 ^th day following the Executive’s Termination Date.

2.26 “Performance Period” has the meaning set forth in Section 3.2(b).

2.27 “Plans” has the meaning set forth in Section 3.2(c).

2.28 “Profit Sharing Plan” means the Commercial Metals Company Profit Sharing and 401(k) Plan or any successor plan thereto.

2.29 “Short Fall Amount” has the meaning set forth in Section 6.4.

2.30 “Qualifying Termination” means a Constructive Termination of the Executive’s employment pursuant to Section 4.4.

2.31 “Termination Date” means the date of termination of the Executive’s employment; provided, however, that if the Executive’s employment is terminated by reason of Disability, then the Termination Date shall be the Disability Effective Date (as defined in Section 4.1).

2.32 “Welfare Continuance Benefit” has the meaning set forth in Section 5.1(d).

2.33 “Welfare Plans” has the meaning set forth in Section 3.2(d).

ARTICLE III
EMPLOYMENT AFTER A CHANGE IN CONTROL

3.1 Employment . The Company hereby agrees to continue the Executive in its employ during the Employment Period and, unless the Executive provides an express written consent otherwise, the Executive will have duties and such other powers that are substantially equivalent to the duties and powers which the Executive had prior to the Change in Control. Subject to Article IV of this Agreement, the Executive agrees to remain in the employ of the Company subject to the terms and conditions hereof and (i)

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will devote his knowledge, skill and best efforts on a full-time basis to performing his duties and obligations to the Company (with the exception of absences on account of illness or vacation in accordance with the Company’s policies, and civic and charitable commitments not involving a conflict with the Company’s business), (ii) will comply with the directions and orders of the Board with respect to the performance of his duties, and (iii) will comply with the provisions of Article X.

3.2 Compensation and Benefits .

(a) Base Salary . During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate at least equal to the highest monthly base salary paid or payable to the Executive by the Company (including any base salary which has been earned but deferred by the Executive) in respect of the twelve-month period immediately preceding the month in which the Change in Control Date occurs. During the Employment Period, the Annual Base Salary shall be increased from time to time as substantially consistent with increases in base salary awarded to other peer executives of the Company. Annual Base Salary shall not be reduced after any such increase, and the term Annual Base Salary as used in this Agreement shall refer to Annual Base Salary as so adjusted.

(b) Cash Bonus Opportunity . In addition to the Annual Base Salary, during the Employment Period the Company shall grant or cause to be granted to the Executive cash bonus opportunities (each a “Cash Bonus Opportunity”) for each Performance Period which ends or begins during the Employment Period. “Performance Period” means each period of time designated in accordance with any cash incentive arrangement which is based upon performance, including the Annual Cash Incentive Plan and the Long-Term Performance Plan. The Executive’s target and maximum Cash Bonus Opportunity with respect to any Performance Period shall not be less than the largest target and maximum established for the Executive under any Company cash incentive arrangement, including the Annual Cash Incentive Plan and the Long-Term Performance Plan, as in effect for a Performance Period immediately preceding the Change in Control Date.

(c) Incentive, Savings and Retirement Plans . During the Employment Period, the Executive shall be entitled to participate in all incentive, savings, deferred compensation and retirement plans, practices, policies and programs (“Plans”) applicable generally to other peer executives of the Company, but in no event shall such Plans provide the Executive with incentives or savings and retirement benefits which, in each case, are less favorable in the aggregate than the greater of (i) those provided by the Company for the Executive under such Plans as in effect at any time during the 90-day period immediately preceding the Change in Control Date, or (ii) those provided generally at any time after the Change in Control Date to other peer executives of the Company. The Plans shall include both tax-qualified retirement plans and nonqualified retirement plans, and any equity or cash-based incentive plans.

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(d) Welfare Benefit Plans . During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs that provide benefits including, but not limited to, medical, prescription, dental, disability, group life, accidental death and travel accident insurance benefits (“Welfare Plans”), but in no event shall such Welfare Plans provide the Executive with benefits which are less favorable, in the aggregate than the greater of (i) those provided by the Company for the Executive under such Welfare Plans as in effect at any time during the 90-day period immediately preceding the Change in Control Date, or (ii) those provided generally at any time after the Change in Control Date to other peer executives of the Company.

(e) Other Employee Benefits . During the Employment Period, the Executive shall be entitled to other employee benefits and perquisites in accordance with the most favorable plans, practices, programs and policies of the Company, as in effect with respect to the Executive at any time during the 90-day period immediately preceding the Change in Control Date, or if more favorable, as in effect generally with respect to other peer executives of the Company. These other employee benefits and perquisites include, but are not limited to, vacation and use of a Company car.

3.3 Affiliates . If immediately prior to the Change in Control Date, the Executive was on the payroll of and participated in the Plans of an Affiliate of the Company, the references to the Company contained in Sections 3.1, 3.2 and the other sections of this Agreement shall be read to refer to the Company and to such Affiliate, as applicable.

3.4 Termination Prior to a Change in Control . Notwithstanding anything in this Agreement to the contrary, if a Change in Control occurs and the Executive’s employment with the Company or an Affiliate was terminated by the Company or an Affiliate prior to the Change in Control Date other than for Cause or Disability, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control, or (ii) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of this Agreement the Executive’s termination of employment shall be treated as an involuntary termination of the Executive’s employment occurring immediately after the Change in Control Date, and the Executive shall be entitled to receive the amounts described in Section 5.1 of this Agreement. In addition, if the Executive’s employment is terminated by the Company other than for Cause or Disability within 90 days prior to a Change in Control, such termination shall conclusively be deemed to have occurred following a Change in Control.

ARTICLE IV
TERMINATION OF EMPLOYMENT

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4.1 Disability . During the Employment Term, the Company may terminate the Executive’s employment if the Executive becomes Disabled. The Executive’s employment shall terminate effective on the 30th day after the Executive’s receipt of written notice of termination from the Company (the “Disability Effective Date”).

4.2 Death . The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Term.

4.3 Cause . The Company may terminate the Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” means (a) material misappropriation with respect to the business or assets of the Company, (b) persistent refusal or willful failure constituting gross dereliction by the Executive to substantially perform the Executive’s duties and responsibilities to the Company, which continues after the Executive receives written notice from the Company of such refusal or failure and which is not remedied by the Executive within thirty (30) days following receipt of the Company’s written notice, (c) conviction of a felony or crime involving fraud, dishonesty or moral turpitude, or (d) the use of drugs or alcohol that interferes materially with the Executive’s performance of his duties.

4.4 Constructive Termination . The Executive may terminate the Executive’s employment for Constructive Termination at any time during the Employment Period. “Constructive Termination” means any material breach of this Agreement by the Company during the Employment Period, including:

(a) the failure to maintain the Executive in the office or position, or in a substantially equivalent office or position, held by the Executive immediately prior to the Change in Control Date;

(b) a material adverse change in the nature or scope of the Executive’s position, duties, powers, functions or responsibilities as compared to the nature or scope of such office, position, duties, powers, functions or responsibilities immediately prior to the Change in Control Date; provided, however, that a diminution of the Executive’s duties, functions or responsibilities attributable solely to the Company ceasing to be a public company on or after the Change in Control Date shall not alone constitute a material adverse change;

(c) any failure by the Company to provide the Executive with the compensation and benefits described in Section 3.2, including any reduction of the Executive’s Annual Base Salary in violation of Section 3.2(a);

(d) the failure of any successor to the Company to assume this Agreement; or

(e) any requirement by the Company that the Executive relocate more than 50 miles from (i) the Executive’s workplace, or (ii) the principal offices of the Company (if such offices are the Executive’s workplace), in each case without the

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consent of the Executive. Constructive Termination shall be deemed to have occurred on the date the Company communicates such requirement, either in writing or otherwise.

Notwithstanding the foregoing, an act or omission shall not constitute Constructive Termination unless (1) the Executive gives written notice to the Company indicating that the Executive intends to terminate employment under this Section 4.4; (2) the Executive’s voluntary termination occurs within sixty (60) days after the Executive knows or reasonably should know of an event described above, or within sixty (60) days after the last in a series of such events, and (3) the Company has failed to remedy the event described above, as the case may be, within thirty (30) days after receiving the Executive’s written notice. If the Company remedies the event described above, as the case may be, within thirty (30) days after receiving the Executive’s written notice, the Executive may not terminate employment under this Section 4.4 on account of the event specified in the Executive’s notice.

ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION

5.1 If by the Executive for a Qualifying Termination or by the Company Other Than for Cause or Disability . If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause or Disability, or if the Executive shall terminate employment for a Qualifying Termination, the Company’s obligations to the Executive shall be as follows:

(a) The Company shall pay to the Executive by no later than the Payment Date a lump sum cash payment equal to the sum of the following amounts:

(i) the Annual Base Salary and all earned but not used paid vacation time through the Termination Date;

(ii) all amounts previously deferred by the Executive under any nonqualified deferred compensation plan sponsored by the Company or its Affiliates (together with any accrued earnings thereon) which have not yet been paid and which otherwise would be payable under the terms of such nonqualified deferred compensation plan on account of the Executive’s termination of employment, unless payment of such amounts would constitute an invalid acceleration of the time or schedule of a payment under Code Section 409A; and

(iii) all amounts payable to the Executive under the terms of the Annual Cash Incentive Plan and Long-Term Performance Plan to the extent that such amounts have not yet been paid, unless payment of such amounts would constitute an invalid acceleration of the time or schedule of a payment under Code Section 409A.

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(b) The Company shall pay to the Executive by no later than the Payment Date a lump sum cash payment equal to [insert either three or four] times the Executive’s Highest Annual Base Salary.

(c) On the Termination Date, the Executive shall become fully vested in any and all stock incentive awards granted to the Executive pursuant to any Plan or otherwise which have not become exercisable as of the Termination Date. On the Termination Date, all stock options (including options vested as of the Change in Control Date) shall remain exercisable until the last date on which the option was scheduled to expire, without regard to whether termination of the Executive’s employment would have provided for a shorter exercise period following such termination of employment; provided, however, that the exercise period of an option shall be extended only to the latest date on which it may be exercised without subjecting such option to the provisions of Code Section 409A or resulting in treatment of the option as a new grant on the date of extension. All forfeiture conditions that as of the Termination Date are applicable to any restricted stock, restricted stock units, stock appreciation rights, performance grants or other incentive awards granted to the Executive by the Company pursuant to any Plan or otherwise shall lapse immediately.

(d) During the Benefit Continuation Period, the Executive and his dependents will continue to be covered by all Welfare Plans in which he or his dependents were participating immediately prior to the Termination Date (the “Welfare Continuance Benefit”). The Company shall pay all the COBRA premium cost otherwise due from Executive for continued participation of the Executive and dependents in the Company’s medical welfare benefit plan. The Company shall pay all or that portion of the premium costs of the Welfare Continuance Benefit for the Executive and dependents under Welfare Plans other than the Company’s medical welfare benefit plan on the same basis as applicable under such Welfare Plans immediately preceding the Termination Date, and the Executive will pay additional premium costs (if any) as applicable immediately preceding the Termination Date. In determining the level of benefits to which the Executive is entitled under any of the Welfare Plans, the Executive shall be deemed to be paid during the Benefit Continuation Period annual compensation no less than the Annual Base Salary in effect prior to the Termination Date. If participation or continued participation under any one or more of the Welfare Plans included in the Welfare Continuance Benefit is not possible under the terms of the Welfare Plan or any provision of law or if such participation or continued participation would create an adverse tax consequence for the Executive or the Company due to such participation, the Company will provide substantially identical benefits directly or through one or more insurance arrangements. The Welfare Continuance Benefit as to a Welfare Plan will cease if and when the Executive has obtained coverage under one or more welfare benefit plans of a subsequent employer and such plan provides coverage to the Executive and his dependents of the same type as provided under such Welfare Plan.

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(e) To the extent that the Executive would not otherwise be entitled to receive an allocation of Employer Contribution under the Profit Sharing Plan or Benefit Restoration Plan for the Plan Year in which the Termination Date occurs and for the Plan Years including all or a portion of the Benefit Continuation Period, the Company shall pay to the Executive on the Payment Date a lump sum cash payment equal to the equivalent of the Employer Contribution that the Company would have allocated to the Executive’s account in each of the Profit Sharing Plan and Benefit Restoration Plan as if the Executive had satisfied all requirements under the Profit Sharing Plan and Benefit Restoration Plan to be eligible to receive an allocation of the Employer Contribution for the Plan Year in which the Termination Date occurs, and each Plan Year or pro-rata portion thereof during the Benefit Continuation Period. For purposes of calculating this payment:

(i) the eligible compensation of the Executive shall be deemed to be an amount equal to the greatest of (i) twice the Executive’s Highest Annual Base Salary, (ii) the eligible compensation used to calculate the Employer Contribution to the Executive’s account for the last Plan Year prior to the Plan Year in which the Termination Date occurs or (iii) the eligible compensation earned by the Executive during the Plan Year to the Termination Date including the amounts described in Section 5.1 (a) (b) and (c); and

(ii) the Executive shall be deemed to have deferred the maximum amount of compensation permitted by law or terms of the plan which would result in a credit to the Executive’s account of the maximum amount of Employer Contribution in both the Profit Sharing Plan and Benefit Restoration Plan of the maximum Employer Contribution; and

(iii) the Employer Contribution calculated as a percentage of the eligible compensation shall be deemed to be the greater of the Employer Contribution for the last Plan Year prior to the Plan Year in which the Termination Date occurs or the average of the Employer Contribution for the last five Plan Years.

Capitalized terms contained in this subsection which are not otherwise defined in this Agreement shall have the meaning assigned to such terms under the Profit Sharing Plan or Benefit Restoration Plan.

5.2 If by the Company for Cause, Disability or Death or if by the Executive for Other than for a Qualifying Termination . If, during the Employment Period, the Company terminates the Executive’s employment for Cause, Disability or the death of the Executive or, in the event the Executive terminates employment for any reason other than for a Qualifying Termination, this Agreement shall terminate without further obligation by the Company to the Executive, other than:

(a) the obligation to immediately pay the Executive the amounts described in Section 5.1(a), and

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(b) the obligation, to the extent required by law or regulation or pursuant to the terms of the Plans, to provide benefits under the terms of any of the Plans, Welfare Plans and other employee benefit programs in which the Executive was participating immediately prior to the Termination Date, pursuant to Sections 3.2(c) through (e).

ARTICLE VI
TAX MATTERS

6.1 Excise Tax Determination. If any benefit, payment or distribution by the Company or an Affiliate to or for the benefit of the Executive or his legal representatives and dependents, whether payable or distributable pursuant to the terms of this Agreement or pursuant to any other plan, agreement, program or arrangement including, but not limited to, the Annual Cash Incentive Plan, Long –Term Performance Plan, Benefit Restoration Plan, or Equity Incentive Plans (collectively “Change in Control Arrangements”) would be subject to the excise tax imposed on the Executive under Code Section 4999 on “excess parachute payments” (all of such benefits, payments or distributions, whether or not subject to the excise tax, in aggregate, the “Change in Control Payment”), the Company shall, within twenty (20) days of the Termination Date, provide the Executive with a written notice and explanation of such determination. The notice shall include (i) a calculation computing the amount of the excise tax to be owed by the Executive upon receipt of the Change in Control Payment, detailing (a) the total amount of cash to be paid and the amount of such cash subject to the excise tax, (b) the amount of and assumptions used to determine the value of all non-cash benefits to be provided and such non-cash benefits subject to the excise tax, (c) the Executive’s base amount of total taxable compensation used in the calculation, and (d) the total amount subject to the excise tax, (ii) a calculation of the maximum amount of the Change in Control Payment that could be paid by the Company to the Executive without the imposition of the excise tax (the “Capped Amount”), and (iii) calculations showing whether the Executive would receive a larger amount, on an after-tax basis (assuming, for United States taxpayers, payment by the Executive of the Code Section 4999 excise tax and on the portion in excess of the Capped Amount payment of taxes based on the following: (A) the highest marginal federal personal income tax rate, (B) the highest marginal state and local income tax rates for the state in which the Executive is domiciled, and (C) the hospital insurance tax rate under Code Section 311 (b)), if the Company were to pay the Executive (a) the Capped Amount or (b) the Change in Control Payment. The Company shall pay to the Executive on the Payment Date the Capped Amount or the Change in Control Payment, whichever is determined to result in the larger amount as calculated pursuant to clause (iii) of the preceding sentence.

The computations and explanation required under this subsection will be made by the accounting firm which was serving as the Company’s independent auditor as of the Termination Date, or if that firm is not available to perform the computation, the computation shall be performed by a tax counsel or nationally recognized accounting firm selected by mutual consent of the Company and the Executive (the “Auditor”). The fees and expenses of the Auditor will be paid solely by the Company. The computations

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and valuations required under this section will be performed in a manner consistent with the requirements of Code Sections 280G and 4999, as in effect at the time the computations and valuations are performed.

6.2 Funding for Certain Payments . Without affecting its obligations to or the rights of the Executive under this Agreement, the Company shall, as soon as possible following the Change in Control but in no event later than thirty (30) days following the Change in Control Date, establish an irrevocable grantor trust within the meaning of Code Sections 671 through 679 for amounts payable under this Agreement (if such a trust has not previously been established), and shall irrevocably deposit funds with the trustee of such trust of an amount equal to the total cash payments to which the Executive would be entitled under Article V of the Agreement if the Executive had a Qualifying Termination on the Change in Control Date, without regard to whether the Executive actually had a Qualifying Termination on that date. The funds deposited with the trustee of such trust and the earnings thereon will be dedicated to the payment of the cash amounts payable under the Agreement, but shall remain subject to the claims of the general creditors of the Company. The expenses of establishing and maintaining such trust shall be paid solely by the Company. When the Executive or the Executive’s survivors become eligible for payments under this Agreement, such payments will be paid out of the trust fund. If the amounts credited to the trust fund for the benefit of the Executive are not sufficient to satisfy the total amounts payable to the Executive or the Executive’s survivors under this Agreement, the additional amounts necessary to satisfy such payments shall be paid directly by the Company from its general assets. In lieu of establishing an irrevocable grantor trust as described above, the Company may establish an alternative funding arrangement mutually acceptable to the Company and the Executive to fund the amounts payable under this Agreement. Once the total cash payments to which the Executive would be entitled under Article V of this Agreement have been paid from the trust, any remaining funds shall be returned to the Company.

6.3 Compliance with Tax Rules for Nonqualified Deferred Compensation Plans . Notwithstanding any provision of this Agreement to the contrary, and to the extent required by Code Section 409A, payments or provision of benefits to the Executive under this Agreement shall be delayed for six (6) months following the Termination Date. To the extent permitted under Code Section 409A, if the Executive shall be entitled to a payment pursuant to this Agreement prior to the date at which a payment is permitted under Code Section 409A to be made to the Executive solely because of the Code Section 409A six (6) month delay in payment rule for key employees, the Executive shall be entitled to payment by the Company of the applicable employee portion of the applicable withholding taxes due on such payment, if any. Such a payment by the Company of withholding taxes shall reduce the amount otherwise payable to the Executive under this Agreement. To the extent permitted under Code section 409A, if benefits otherwise to be provided to the Executive, such as for example, certain of the benefits provided for in Section 5.1(d), are delayed because of the Code Section 409A six (6) month delay in payment rule for key employees, in order for the Company to provide those benefits during such six-month period, the Executive shall pay the full cost of those benefits for such six-month period. On the first day of the seventh month following the Termination

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Date, in addition to the Company commencing the provision of those benefits in accordance with the terms of this Agreement, the Company shall pay to the Executive, in a lump sum, the total amount the Executive paid for those benefits during such first six-month period.

6.4 Company Obligation to Executive With Regard to Tax Information . If the computations and valuations required to be provided by the Company to the Executive pursuant to Section 6.01 are on audit challenged by the Internal Revenue Service as having been performed in a manner inconsistent with the requirements of Code Sections 280G and 4999 or if Code Section 409A is determined to apply to all or any part of the payments to which the Executive or his survivors may be entitled under this Agreement and as a result of such audit or determination, (i) the amount of cash and the benefits provided for in Section 6.1 remaining to the Executive after completion of such audit or determination is less than (ii) the amount of cash and the benefits which were paid or provided to the Executive on the basis of the calculations provided for in Section 6.1 (the difference between (i) and (ii) plus any legal or accounting fees or expenses incurred by the Executive arising from the audit being referred to as the “Short Fall Amount”), then the Executive shall be entitled to receive an additional payment (a “Make-Whole Payment”) in an amount such that after payment by the Executive of all taxes (including additional excise taxes under said Code Section 4999 and any interest, and penalties imposed with respect to any taxes) imposed upon the Make-Whole Payment, the Executive retains an amount of the Make-Whole Payment equal to the Short Fall Amount. The Company shall pay the Make-Whole Payment to the Executive in a lump sum cash payment within ten (10) days of the completion of such audit or determination.

ARTICLE VII
EXPENSES AND INTEREST

7.1 Legal Fees and Other Expenses . The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any action or proceeding by the Company, the Executive or others concerning the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any action or proceeding by the Executive concerning the amount of any payment pursuant to this Agreement). The Company shall be obligated to pay such legal fees and expenses regardless of the outcome of the action or proceeding, unless a court of competent jurisdiction determines that the Executive acted in bad faith in initiating the action or proceeding.

7.2 Interest . If the Company does not pay any amount due to the Executive under this Agreement within three days after such amount became due and owing, including but not limited to any legal fees or expenses, interest shall accrue on such amount from the date it became due and owing until the date of payment at an annual rate equal to 200 basis points above the prime commercial lending rate published in The Wall Street Journal in effect from time to time during the period of such nonpayment.

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ARTICLE VIII
NO SET-OFF OR MITIGATION

8.1 No Set-off by Company . The Executive’s right to receive when due the payments and other benefits provided for under this Agreement is absolute, unconditional and subject to no set-off, counterclaim or legal or equitable defense. Any claim which the Company may have against the Executive, whether for a breach of this Agreement or otherwise, shall be brought in a separate action or proceeding and not as part of any action or proceeding brought by the Executive to enforce any rights against the Company under this Agreement.

8.2 No Mitigation . The Executive shall not have any duty to mitigate the amounts payable by the Company under this Agreement by seeking new employment following termination. Except as specifically provided in this Agreement, all amounts payable pursuant to this Agreement shall be paid without reduction regardless of any amounts of salary, compensation or other amounts which may be paid or payable to the Executive as the result of the Executive’s employment with another employer.

ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS

9.1 Waiver of Other Severance Rights . To the extent that payments are made to the Executive pursuant to Section 5.1 of this Agreement, the Executive hereby waives the right to receive severance benefits under any plan or agreement (including an offer of employment or employment contract) of the Company or its Affiliates which provides for severance benefits. However, no waiver of severance benefits under another plan or agreement shall take effect pursuant to this Agreement until the Change in Control Date.

9.2 Other Rights . This Agreement shall not prevent or limit the Executive’s continuing or future participation in any Plans, Welfare Plans, or other benefit, bonus, incentive or other plans provided by the Company or any of its Affiliates and for which the Executive may qualify, nor shall this Agreement limit or otherwise affect such rights as the Executive may have under any other agreements with the Company or any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under the terms of any plan or program of the Company or any of its Affiliates and any other payment or benefit required by law at or after the Termination Date shall be payable in accordance with such plan, program or applicable law except as expressly modified by this Agreement.

ARTICLE X
OBLIGATIONS OF THE EXECUTIVE

10.1 Confidentiality . The Company has provided and will provide the Executive with secret or confidential information, knowledge or data relating to the Company or any of its Affiliates and their respective businesses. The Executive will hold in a

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fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its Affiliates and their respective businesses, which will have been obtained by the Executive during the Executive’s employment by the Company or any Affiliate and which will not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive will not, without the prior written consent of the Company or except as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it.

10.2 Non-Competition and Non-Solicitation . The Executive agrees that for a period of one (1) year after the Termination Date, the Executive (i) will not directly or indirectly compete with the business as conducted by the Company or any of its Affiliates on the Termination Date within one hundred (100) miles of any office or facility of the Company or any of its Affiliates, (ii) will not hire or otherwise employ or retain, or knowingly permit (to the extent reasonably within the Executive’s control) any other entity or business which employs the Executive or in which the Executive has any ownership interest or is otherwise involved to hire or otherwise employ or retain, any person who was employed by the Company or any of its Affiliates as of the Termination Date, and (iii) will not solicit or in any manner attempt to influence or induce any customer of the Company or any of its Affiliates to transact any business with any Person that competes with the business as conducted by the Company or any of its Affiliates as of the Termination Date.

10.3 Enforcement . In the event of a breach or threatened breach of this Article X, the Executive agrees that the Company will be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, and the Executive acknowledges that damages would be inadequate and insufficient. If the Company obtains a judicial determination that the Executive has breached the terms of this Article X, all rights of the Executive under this Agreement will terminate.

10.4 Reformation . If any court holds that any of the covenants contained in this Article X shall be effective in any particular area or jurisdiction only if such covenant is modified to limit its duration or scope or in any other manner, the court shall have such authority to so reform the covenant, and the parties hereto shall consider such covenant to be modified with respect to that particular area or jurisdiction so as to comply with the order of such court and, as to all other jurisdictions, the covenants contained herein shall remain in full force and effect as originally written. If any court holds that any of the covenants contained in this Article X is void or otherwise unenforceable in any particular area or jurisdiction, the Company may consider such covenant to be amended and modified so as to eliminate therefrom the particular area or jurisdiction as to which such covenant is so held void or otherwise unenforceable, and, as to all other areas and jurisdictions covered hereunder, the covenants contained herein shall remain in full force and effect as originally written.

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ARTICLE XI
MISCELLANEOUS

11.1 No Assignment of Benefit . No interest of the Executive or any beneficiary under this Agreement, or any right to receive any payment or distribution hereunder, will be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind, nor may such interest or right to receive a payment or distribution be taken, voluntarily or involuntarily, for the satisfaction of the obligations or debts of, or other claims against, the Executive or Beneficiary, including claims for alimony, support, separate maintenance, and claims in bankruptcy proceedings.

11.2 Rights Under the Agreement . The right to receive benefits under the Agreement will not give the Executive any proprietary interest in the Company, its Affiliates or any of the assets of the Company or its Affiliates. Except to the extent otherwise provided in Section 6.2 of this Agreement or under the terms of the Plans or Welfare Plans, amounts payable under the Agreement will be paid from the general assets of the Company. The Executive will for purposes of this Agreement be a general creditor of the Company.

11.3 Applicable Law . This Agreement will be construed and interpreted pursuant to the laws of the State of Texas, without reference to its conflict of laws rules.

11.4 No Employment Contract . Nothing contained in this Agreement will be construed to be an employment contract between the Executive and the Company prior to a Change in Control Date.

11.5 Severability . In the event any provision of this Agreement is held illegal or invalid, the remaining provisions of this Agreement will not be affected thereby.

11.6 Successors . The Agreement will be binding upon and inure to the benefit of the Company, the Executive and their respective heirs, representatives and successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term “Company” means the Company as hereinbefore defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

11.7 Amendment; Waiver . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and the writing is signed by the Executive and the Company. A waiver of any breach of or compliance with any provision or condition of this Agreement is not a waiver of similar or dissimilar provisions or conditions. This Agreement may be executed

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in one or more counterparts, all of which will be considered one and the same agreement. Notwithstanding any other provisions of this Agreement to the contrary, the parties agree that they will in good faith amend this Agreement in any manner reasonably necessary to comply with Code Section 409A, and the parties further agree that any provisions of this Agreement that shall violate the requirements of Code Section 409A shall be of no force and effect after such amendment.

11.8 Notices . All notices and other communications hereunder will be in writing and will be given by hand delivery acknowledged in writing by the recipient personally, or given by first-class mail, registered or certified, with return receipt requested, postage prepaid, and shall be deemed to have been duly given three days after mailing or immediately upon duly acknowledged hand delivery, as applicable, to the respective persons named below:


		If to the Company:		Commercial Metals Company
				P.O. Box 1046
				Dallas, Texas 75221
				Attn: General Counsel

		If to the Executive:

or to such other address as either party will have furnished to the other in writing in accordance herewith.

11.9 Tax Withholding . The Company shall withhold from any amounts payable under this Agreement any federal, state or local taxes that are required to be withheld pursuant to any applicable law or regulation.

IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the date first above written.


		COMMERCIAL METALS COMPANY

		By:

		Name:

		Title:

		EXECUTIVE

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EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Stanley A. Rabin, certify that:

1. I have reviewed this report on Form 10-Q of Commercial Metals Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 7, 2006

/s/ Stanley A. Rabin
Stanley A. Rabin
Chairman of the Board and
Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, William B. Larson, certify that:

1. I have reviewed this report on Form 10-Q of Commercial Metals Company;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 7, 2006

/s/ William B. Larson
William B. Larson
Vice President and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Commercial Metals Company (the “Company”) on Form 10-Q for the period ended February 28, 2006 (the “Report”), I, Stanley A. Rabin, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stanley A. Rabin
Stanley A. Rabin
Chairman of the Board
and Chief Executive Officer

Date: April 7, 2006

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Commercial Metals Company (the “Company”) on Form 10-Q for the period ended February 28, 2006 (the “Report”), I, William B. Larson, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William B. Larson
William B. Larson
Vice President and Chief Financial Officer

Date: April 7, 2006