COMMERCIAL METALS CO - 10-Q Quarterly Report

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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

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

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For Quarter ended May 31, 2003
Commission File Number 1-4304

COMMERCIAL METALS COMPANY
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(Exact Name of registrant as specified in its charter)

Delaware 75-0725338
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(State or other Jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)

6565 N. MacArthur Blvd.
Irving, Texas 75039
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(Address of principal executive offices)
(Zip Code)

(214) 689-4300
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(Registrant's telephone number, including area code)

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Former name, former address and former fiscal year,
If changed since last report

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 No
X
--- ---

As of June 30, 2003 there were 27,950,196 shares of the Company's common stock
issued and outstanding excluding 4,314,970 shares held in the Company's
treasury.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

INDEX

1

ITEM 1 - FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

ASSETS
( In thousands except share data)

See notes to condensed consolidated financial statements.

2

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands except share data)

See notes to condensed consolidated financial statements.

3

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except share data)
(Unaudited)

See notes to condensed consolidated financial statements.

4

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

See notes to condensed consolidated financial statements.

5

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands except share data)
(Unaudited)

See notes to condensed consolidated financial statements.

6

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A - QUARTERLY FINANCIAL DATA

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position as
of May 31, 2003 and August 31, 2002 and the results of operations for the three
and nine months ended May 31, 2003 and 2002 and cash flows for the nine months
ended May 31, 2003 and 2002. The results of operations for the nine month
periods are not necessarily indicative of the results to be expected for a full
year. These interim financial statements should be read in conjunction with the
Company's consolidated financial statements for the year ended August 31, 2002
included in its Form 10-K filed with the Securities and Exchange Commission.

NOTE B - ACCOUNTING POLICIES

Effective September 1, 2002, goodwill was no longer amortized.
Goodwill was $6.8 million at May 31, 2003 and at August 31, 2002. The comparison
to the prior year period was as follows (in thousands):

The goodwill amortization was $0.01 per basic and diluted share for
the three months ended May 31, 2002, and $0.02 per basic and diluted share for
the nine months ended May 31, 2002.

In November 2002, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees on Indebtedness of Others which
applies to all guarantees issued or modified after December 31, 2002. The
Company has not entered into or modified any significant guarantees since
December 31, 2002, and therefore no liability was recorded at May 31, 2003. The
Company's existing guarantees at December 31, 2002 had been given at the request
of a customer and its surety bond issuer. The Company has agreed to indemnify
the surety against all costs that the surety may incur should the customer fail
to perform its obligations under construction contracts covered by payment and
performance bonds issued by the surety. As of May 31, 2003, the surety had
issued bonds in the total amount (without reduction for the work performed to
date) of $11.9 million, which are subject to the Company's guarantee obligation
under the indemnity agreement. The fair value of these guarantees was not
significant.

7

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

STOCK-BASED COMPENSATION

The Company accounts for stock options granted to employees and
directors using the intrinsic value based method of accounting. Under this
method, the Company does not recognize compensation expense for the stock
options because the exercise price is equal to the market price of the
underlying stock on the date of the grant. If the Company had used the fair
value based method of accounting, net earnings and earnings per share would have
been reduced to the pro-forma amounts listed in the table below. The
Black-Scholes option pricing model was used to calculate the pro forma
stock-based compensation costs. For purposes of the pro forma disclosures, the
assumed compensation expense is amortized over the option's vesting periods. The
pro forma information is consistent with assumptions used in the year end
calculations.

(in thousands, except per share amounts)

NOTE C - SALES OF ACCOUNTS RECEIVABLE

As a cost effective short-term financing program, the Company and
several of its subsidiaries periodically sell trade accounts receivable
substantially to the Company's wholly-owned unconsolidated special purpose
affiliate. Depending on the level of financing needs, the affiliate receives
funds from a third party financial institution. The key components were as
follows (in thousands):

The notes receivable from affiliate are presented in the condensed consolidated
balance sheets net of allowance of $3.1 million at May 31, 2003 and $2.9 million
at August 31, 2002. These notes represent amounts withheld for credit and other
reserves, as well as excess funding capacity not currently needed by the
Company. Discounts were $199 thousand and $510 thousand for the three and nine
months ended May 31, 2003, and $69 thousand and $699 thousand for the three and
nine months ended May 31, 2002, respectively. These discounts represented
primarily the costs of funds and were included in selling, general and
administrative expenses.

8

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In addition to the arrangement described above, the Company's international
subsidiaries periodically sell accounts receivable. Accounts receivable sold
under these arrangements totaled $27.1 million at May 31, 2003 and $2.1 million
at August 31, 2002.

NOTE D - INVENTORIES

Before deduction of last in first out (LIFO) inventory valuation
reserves of $16.1 million and $8.1 million at May 31, 2003 and August 31, 2002,
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 $16.3 million and
$16.5 million were in raw materials at May 31, 2003 and August 31, 2002,
respectively.

NOTE E - LONG TERM DEBT

Long-term debt (in thousands) was as follows:

On April 9, 2002 the Company entered into two interest rate swaps to convert a
portion of the Company's long term debt from a fixed interest rate to a floating
interest rate. The impact of these swaps is to adjust the amount of fixed rate
and floating rate debt and to reduce overall financing costs. The swaps
effectively convert the interest rate on the $100 million debt due July 2005
from the fixed rate of 7.20% to six month LIBOR (determined in arrears) plus a
spread of 2.02%. The interest rate is set on January 15th and July 15th, and for
the quarter ended May 31, 2003, was estimated to be an annualized rate of 3.19%.
The total fair value of both swaps, including accrued interest, was $8.4 million
and $5.2 million at May 31, 2003 and August 31, 2002, respectively. The swaps
are recorded in other long-term assets, with a corresponding increase in the
7.20% long-term notes, representing the change in fair value of the hedged debt.
These hedges were highly effective for the three and nine months ended May 31,
2003.

NOTE F - EARNINGS PER SHARE

On May 20, 2002, the Company's Board of Directors declared a
two-for-one stock split in the form of a 100% stock dividend on its common
stock.

In calculating earnings per share, there were no adjustments to net
earnings to arrive at income for the three or nine months ended May 31, 2003 or
2002. The reconciliation of the denominators of earnings per share calculations
are as follows:

9

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock options with total share commitments of 1,206,335 at May 31, 2003 were
anti-dilutive based on the average share price for the quarter of $15.34. All
stock options expire by 2010.

At May 31, 2003, the Company had authorization to purchase 1,116,152 of its
common shares.

All stock options at May 31, 2002 were dilutive based on the average share price
of $21.145 for the quarter.

NOTE G- 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 declines 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.
The Company designates only those contracts as hedges for accounting purposes
which closely match the terms of the underlying transaction. These hedges
resulted in substantially no ineffectiveness in the statements of earnings for
the three or nine months ended May 31, 2003 and 2002. Certain of the foreign
currency and all of the commodity contracts were not designated as hedges for
accounting purposes, although management believes they are essential economic
hedges. The changes in fair value of these instruments resulted in a $106
thousand increase and a $199 thousand decrease in cost of goods sold for the
three months ended May 31, 2003 and 2002, respectively. Also, cost of goods sold
decreased by $391 thousand and $546 thousand for the nine months ended May 31,
2003 and 2002, respectively, due to changes in the fair value of these
instruments. All of the instruments are highly liquid, and none are entered into
for trading purposes or speculation.

See Note E, Long-Term Debt, regarding the Company's interest rate risk
management strategy.

NOTE H - CONTINGENCIES

CONSTRUCTION CONTRACT DISPUTES

See Note 10, Commitments and Contingencies, to the consolidated
financial statements for the year ended August 31, 2002.

At August 31, 2002, $9.6 million was accrued (including interest) for
an adverse trial judgment. The judgment was upheld on appeal in February 2003,
and paid and released during the three months ended May 31, 2003.

Subsequent to May 31, 2003, the Company's subsidiary, SMI-Owen Steel
Company, Inc., (SMI-Owen) settled, contingent upon approval by the Bankruptcy
Court which has jurisdiction over one of the parties, all disputes between
SMI-Owen, the general contractor and the owner of a large hotel and casino
complex. SMI-Owen will pay $1.25 million of the $3.5 million settlement payment
with $2.25 million to be paid by an insurance company. The resolution of this
dispute will resolve all material claims asserted against SMI-Owen arising from
the project. The settlement agreement provides that SMI-Owen reserves all rights
with regard to pending litigation against an insurance broker for insurance
benefits not received by SMI-Owen due to the broker's acts, errors, omissions
and other conduct related to the insurance program for the project. The Company
had adequate amounts accrued at May 31, 2003.

10

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

ENVIRONMENTAL AND OTHER MATTERS

In the ordinary course of conducting its business, the Company
becomes involved in litigation, administrative proceedings and governmental
investigations, including environmental matters. Management believes that
adequate provision has been made in the financial statements for the potential
impact of these issues, and that the outcomes will not significantly impact the
results of operations or the financial position of the Company, although they
may have a material impact on earnings for a particular quarter.

A subsidiary of the Company has been notified that a customer, now in
bankruptcy proceedings, alleges the subsidiary received payments from the
customer within 90 days of bankruptcy filing which are voidable and should be
returned to the bankruptcy estate. The payments were for materials and services
sold by the subsidiary to the customer. The Company believes it has valid legal
defenses against such claim and intends to vigorously defend this claim. The
Company had accrued $1 million as of May 31, 2003 relating to this matter.

The Company is involved in various other claims and lawsuits
incidental to its business. In the opinion of management, these claims and suits
in the aggregate will not have a material adverse effect on the results of
operations or the financial position of the Company.

NOTE I - RECLASSIFICATIONS

Certain reclassifications have been made in the 2002 financial
statements to conform to the classifications used in the current year.

NOTE J - ACQUISITIONS

On May 5, 2003, the Company acquired substantially all of the
operating assets of the Denver, Colorado location of Symons Corporation for $5.6
million cash. This acquisition expands the Company's concrete form and
construction-related product sales in the western part of the United States. The
purchase price allocation has been prepared on a preliminary basis, and
reasonable changes may be made following valuation by business appraisers of the
intangible assets. Following is a summary of the estimated fair values of the
assets acquired as of the date of the acquisition (in thousands):

Rental equipment $4,400
Identifiable intangible assets 1,000
Inventory 173
Equipment 55
------
$5,628
======

Rental equipment and intangible assets are included in long-term other assets on
the May 31, 2003 condensed consolidated balance sheets. The results of
operations subsequent to May 5, 2003 are included in the condensed consolidated
statement of earnings.

11

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE K - BUSINESS SEGMENTS

The following is a summary of certain financial information by reportable
segment (in thousands):

12

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

CONSOLIDATED RESULTS OF OPERATIONS
(in millions)

* Earnings before financing costs, income taxes, depreciation and amortization.

We have included a financial statement measure in the table above that was not
derived in accordance with generally accepted accounting principles (GAAP).
EBITDA is a non-GAAP financial performance measure. In calculating EBITDA, we
exclude our largest recurring non-cash charge, depreciation and amortization. We
and others use EBITDA as one guideline to assess our ability to pay our current
debt obligations as they mature and a tool to calculate possible future levels
of leverage capacity. Reconciliations to the most comparable GAAP measure, net
earnings, are provided below (in millions):

The following events had a significant financial impact during the third quarter
ended May 31, 2003 as compared to 2002:

- - We recorded a $3.4 million (after-tax) LIFO expense ($0.12 per diluted
share) compared to minimal LIFO expense in the prior year period.

- - Our steel and the copper tube minimills' earnings decreased due
primarily to higher scrap, utility and other input costs which were not
offset by increased selling prices.

- - Margins were lower at the steel group's fabrication operations due to
lower selling prices, in spite of higher shipments.

- - In the prior year third quarter, we recorded a $3.4 million (after-tax)
gain from the sale of the assets of SMI Owen Steel Company.

13

- - Profits in our recycling segment more than doubled from last year's
third quarter due mostly to the steel (ferrous) scrap markets.

- - Marketing and distribution's operating profit was significantly higher
than last year's third quarter, with most of the improvement in
international markets.

- - We reduced bonuses, contributions and employee's retirement plan
expenses in line with lower earnings.

- - We maintained excess cash and had no short-term debt at May 31, 2003.

CONSOLIDATED DATA -

The LIFO method of inventory valuation decreased net earnings by $3.4 million
and $5.2 million for the three and nine months ended May 31, 2003, respectively.
LIFO reduced diluted earnings per share by 12 cents and 18 cents for the three
and nine months ended May 31, 2003, respectively. For the three and nine months
ended May 31, 2002, LIFO increased net earnings by $137 thousand and $101
thousand, respectively, (no effect per diluted share).

SEGMENT OPERATING DATA -

Unless otherwise indicated, all dollars below are before income taxes.

Our management uses a non-GAAP measure, operating profit, to compare and
evaluate the financial performance of our segments. Operating profit, as
presented below, is the sum of our earnings before income taxes, and financing
costs. Operating profit provides a core operational earnings measurement that
compares segments without the need to adjust for federal, but more specifically
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 operating
profit. The results are therefore without consideration of financing
alternatives of capital employed. In the following table we are providing a
reconciliation of the non-GAAP measure, operating profit (loss), to net earnings
(loss), the most comparable GAAP measure (in thousands):

14

The following table shows net sales and operating profit (loss) by business
segment (in thousands):

15

MANUFACTURING -

We include our steel group and our copper tube division in our manufacturing
segment. Operating profit is approximately equal to earnings before income taxes
for our four steel minimills, our copper tube mill and the steel group's
fabrication operations. Our manufacturing operating profit for the three months
ended May 31, 2003 decreased $23.8 million as compared to 2002. Excluding the
gain of $5.2 million from the sale of SMI Owen in 2002, operating profit
decreased 89%. Without the 2002 gain, net sales increased $2.7 million (1%).
Scrap purchase prices were driven sharply higher by offshore demand and the
weakening value of the U.S. dollar. Our steel minimills implemented higher
selling prices late in the second quarter 2003, and again in the third quarter.
These price increases became partially effective in our third quarter.
Therefore, the price increases did not fully offset higher scrap and utility
costs. Gross margins were significantly lower as a result of these conditions.
Our copper tube mill's gross margins were also lower due to increased copper
scrap purchase prices and lower selling prices for its products. Our steel
group's downstream fabrication operations (excluding the gain on the sale of SMI
Owen in 2002) were less profitable in 2003 due to much lower selling prices
which more than offset the impact of higher 2003 shipments.

Our manufacturing segment's operating profit for the nine months ended May 31,
2003 decreased $55.0 million as compared to 2002. The sale of SMI Owen and a
litigation settlement at the mills in 2002 accounted for $10.6 million of the
decrease. Overall shipments for the nine months ended May 31, 2003 were higher
as compared to 2002. However, gross margins were lower primarily because scrap
and utility costs were not offset by price increases.

The table below reflects steel and scrap prices per ton:

Operating profit for our four steel minimills decreased 91% for the three months
ended May 31, 2003 as compared to 2002. The effect of valuing inventories under
the LIFO method accounted for 35% of the decrease in operating profit for the
three months ended May 31, 2003 as compared to 2002. Also, operating profit in
2003 decreased because higher selling prices and more shipments were not enough
to offset higher input costs, including scrap and utilities. Our operating
profit at SMI Texas decreased 30% to $5.1 million for the three months ended May
31, 2003 as compared to an operating profit of $7.3 million in 2002. SMI South
Carolina lost $2.0 million for the three months ended May 31, 2003 as compared
to a $1.6 million operating profit in 2002. Operating profit at our SMI Alabama
mill for the three months ended May 31, 2003 decreased 51% to $949 thousand as
compared to $1.9 million in 2002. SMI Arkansas reported a $3.0 million operating
loss in 2003 as compared to a $1.1 million profit in 2002. The loss was entirely
attributable to LIFO expense caused by anticipated higher year end inventories
of rerolling rail at SMI Arkansas. The mills shipped 634,000 tons in 2003
compared to 612,000 tons in 2002, an increase of 4%, due to higher billet sales.
The mills rolled 544,000 tons, down 2% as compared to 2002. Tons melted
increased 1% to 572,000. The average total mill selling price at $280 per ton
was $13 (5%) above last year. Our mill selling price for finished goods
increased $16 per ton (6%). Average scrap purchase costs were $22 per ton (26%)
higher than last year. Utility expenses increased by $3.5 million for the three
months ended May 31, 2003 as compared to 2002, mostly due to higher natural gas
costs.

16

Operating profit for our four steel minimills decreased 78% for the nine months
ended May 31, 2003 as compared to 2002. The effect of valuing inventories under
the LIFO method accounted for 21% of the decrease in operating profit for the
nine months ended May 31, 2003 as compared to 2002. The average total mill
selling price at $274 per ton was $4 (1%) above last year. But average scrap
purchase costs were $20 per ton (26%) higher than last year. Also, utility
expenses increased by $6.6 million for the nine months ended May 31, 2003 as
compared to 2002, mostly due to higher natural gas costs. The mills shipped
1,676,000 tons year to date in 2003 as compared to 1,589,000 tons in 2002, an
increase of 5%. Also, during the nine months ended May 31, 2002 we received $2.5
million from a graphite electrode litigation settlement.

The steel group's fabrication and other businesses reported a combined operating
profit of $3.6 million for the three months ended May 31, 2003 as compared to a
profit of $14.1 million in 2002. We recorded a $5.2 million gain from the sale
of SMI Owen Steel Company in March 2002. Excluding this gain, operating profits
decreased by $5.3 million (60%) for the three months ended May 31, 2003 as
compared to 2002. Our fabrication plants shipped 286,000 tons in 2003, 15% more
than 2002's third quarter shipments of 248,000 tons. Our fabricated rebar
shipments increased 51,000 tons (37%) as compared to 2002. Lower structural,
joist and post plant shipments partially offset this increase. The average
fabrication selling price for the three months ended May 31, 2003 decreased $78
per ton (13%). Our rebar fabrication, construction-related products, post and
heat treating plants were profitable during the third quarter 2003. Our joist
and structural steel fabrication operations recorded losses during the three
months ended May 31, 2003 primarily due to lower selling prices. During the
three months ended May 31, 2003, the joist plants reduced their inventory book
values by $720,000 to their estimated current market value. Also, during the
three months ended May 31, 2003, we wrote-down $393 thousand of inventory at one
of our other fabrication facilities and we recognized a $365 thousand gain on
the trade-in of rental forms in construction-related products. On May 5, 2003,
we acquired substantially all of the operating assets of the Denver, Colorado
location of Symons Corporation, a concrete formwork supplier servicing
construction needs throughout the Rocky Mountain States. The purchase price for
this operation was $5.6 million. See Note J, Acquisitions, to the condensed
consolidated financial statements.

The steel group's fabrication and other businesses reported a combined operating
profit of $3.0 million for the nine months ended May 31, 2003 as compared to a
profit of $30.6 million in 2002. The gain on the sale of SMI Owen in 2002
accounted for $5.2 million of the decrease. Also, prior to its sale, SMI Owen
had an operating profit of $2.9 million for the nine months ended May 31, 2002.
Fabrication plant shipments for the nine months ended May 31, 2003 were about
the same as last year. However, the average fabrication selling price decreased
$83 per ton (13%). Also, during the nine months ended May 31, 2003, the joist
and other fabrication plants wrote down their inventories by $1.9 million as
compared to $627 thousand in 2002. During the nine months ended May 31, 2003, we
recorded a $1 million accrual related to the bankruptcy of a customer.

Our copper tube division reported an operating loss of $563 thousand for the
three months ended May 31, 2003 as compared to an operating profit of $1.3
million in 2002. Net sales were 13% lower for the 2003 third quarter as compared
to 2002. During the three months ended May 31, 2003, the division reported $777
thousand expense under the LIFO inventory valuation method as compared to $512
thousand expense in 2002. Copper tube shipments decreased 6% to 16.0 million
pounds during the 2003 third quarter as compared to 2002. Also, average net
selling prices decreased by 9 cents per pound (7%). Production was constant at
14.8 million pounds. The average copper scrap price increased 2 cents per pound
(3%) during the three months ended May 31, 2003 as compared to 2002. Although
single family residential construction held up relatively well, other market
sectors were weaker, which put pressure on selling prices. Also, poor weather
caused us to delay some shipments during the three months ended May 31, 2003.

Our copper tube division reported an operating profit of $68 thousand for the
nine months ended May 31, 2003 as compared to an operating profit of $4.6
million in 2002. Copper tube shipments increased slightly. However, average net
selling prices decreased by 8 cents per pound (7%). The average copper scrap
price increased by 4 cents per pound (6%) during the nine months ended May 31,
2003 as compared to 2002.

17

RECYCLING -

Our recycling segment reported an operating profit of $5.1 million for the three
months ended May 31, 2003 as compared to an operating profit of $2.2 million in
2002. Net sales for the three months ended May 31, 2003 were 21% higher at $124
million. Gross margins were 31% higher than 2002. The segment recorded $445
thousand LIFO expense during the three months, ended May 31, 2003 as compared to
$71 thousand LIFO income in 2002. The segment processed and shipped 452,000 tons
of ferrous scrap during the three months ended May 31, 2003, 17% more than 2002.
Ferrous sales prices were on average $110 per ton, or 28% higher than 2002.
Greater demand from overseas markets contributed to this increase, as well as
the weaker U.S. dollar. Ferrous scrap prices peaked early during the three
months ended May 31, 2003, having advanced over $30 per ton from January 1,
2003. At May 31, 2003, prices were somewhat less than their peak, as overseas
demand slackened, and warmer weather and the higher prices caused a significant
increase in supply.

Nonferrous markets improved moderately during the three months ended May 31,
2003. The average nonferrous scrap sales price of $1,047 per ton was 5% higher
than in 2002, although shipments were 2% lower at 59,000 tons. The total volume
of scrap processed, including the steel group's processing plants, was 768,000
tons, an increase of 15% from the 667,000 tons processed in 2002.

Our recycling segment reported an operating profit of $10.5 million for the nine
months ended May 31, 2003 as compared to an operating profit of $1.1 million in
2002. Year to date gross margins were 28% higher than in 2002, due to increased
selling prices for both ferrous and nonferrous scrap. The total volume of scrap
processed and shipped, including the steel group's processing plants, was
2,079,000 tons, an increase of 13% from the 1,834,000 tons processed in 2002.

MARKETING AND DISTRIBUTION -

Net sales in the three months ended May 31, 2003 for our marketing and
distribution segment increased to $311 million, a 53% increase from 2002. Most
of the increase related to sales outside of the United States. Operating profit
for the three months ended May 31, 2003 was $5.8 million, up 79% from 2002, due
mostly to better results from our international operations. Our marketing and
distribution and service center operations in Australia continued to be very
profitable even excluding a $450 thousand favorable duty ruling in May 2003. Our
joint venture facility in Belgium, Europickling, had record output for the three
months ended May 31, 2003. Central Europe continued to be a source of
profitability for us. After rising for several quarters, international steel
prices weakened, mainly because of lower prices in China. However, our volumes
increased, except for imports into the United States. Our U.S. divisions were
slightly less profitable for the three months ended May 31, 2003 as compared to
2002 due to the economy, the weaker U.S. dollar and import duties. Gross
margins, volumes and selling prices on our sales of nonferrous semi-finished
goods and industrial materials were mixed. During the three months ended May 31,
2003, our Cometals division recorded a $450 thousand expense due to an
antidumping action by U.S. Customs.

Operating profit for the nine months ended May 31, 2003 for our marketing and
distribution segment increased to $16.0 million as compared to $7.7 million in
2002 due mostly to better results from our international operations. Profits
were better for Europe and Australia. Sales into Asia, including China were
strong, especially during the first and second quarters of our fiscal 2003. Our
U.S. divisions were also more profitable for the nine months ended May 31, 2003
as compared to 2002.

OTHER -

Employee's retirement plan expenses were lower for the three months ended May
31, 2003 as compared to 2002. Overall selling, general and administrative
expenses were 6% higher during the three months ended May 31, 2003 as compared
to 2002. Discretionary items, such as bonuses, contributions and profit sharing
were much lower commensurate with less profitability. Additional selling,
general and

18

administrative expenses resulting from operations acquired since May 31, 2002
offset these decreases in discretionary expenses.

Employee's retirement plan expenses were lower for the nine months ended May 31,
2003 as compared to 2002. Overall selling, general and administrative expenses
were slightly lower for the nine months ended May 31, 2003 as compared to 2002.
Discretionary items, such as bonuses, contributions and profit sharing were
lower commensurate with less profitability. Interest expense for the nine months
ended May 31, 2003 was lower as compared to 2002 due primarily to two interest
rate swaps which resulted in lower effective interest rates.

CONTINGENCIES -

See Note H, 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 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 we deem necessary. 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 or our financial
position. However, they may have a material impact on earnings for a particular
period.

We are subject to federal, state and local pollution control laws and
regulations in all locations we have operating facilities. We anticipate that
compliance with these laws and regulations will involve continuing capital
expenditures and operating costs.

OUTLOOK -

We expect the fourth quarter of our fiscal year ending August 31, 2003 to be
more profitable than the third quarter, although we do not expect it to be as
strong as last year's fourth quarter, primarily because of anticipated LIFO
expenses. Excluding LIFO, we are expecting to achieve net earnings of $6 million
to $9 million for the quarter ending August 31, 2003. We expect a number of our
markets to continue to improve in the fourth quarter and anticipate that profits
will be higher than the third quarter in our manufacturing segment because of
higher material margins and increased production, shipments and prices.

During our third quarter fiscal 2003, we continued to implement two price
increases for most of our steel mill products. These price increases totaled $35
per ton and were partly effective in our third quarter and should become fully
effective during our fourth quarter fiscal 2003. These increases should help
restore gross margins at our steel minimills. Our fabrication businesses should
be more profitable due to better markets and higher shipments. We are also
anticipating better profits at our copper tube mill during the last quarter of
fiscal 2003 when housing and commercial jobs get back on schedule following
weather-related delays. Strong demand for steel and nonferrous scrap combined
with the weaker U.S. dollar will enable our recycling segment to continue to be
profitable, although ferrous prices will be below our third quarter. We believe
that our marketing and distribution markets will have continued good results,
but not as favorable as in our third quarter because of lower demand in China
and elsewhere.

Our 2004 fiscal year should be much more profitable due to an expected overall
improvement in the U.S. economy. We should experience stronger demand for
construction-related products and services. We are also expecting that various
end-use markets around the world will improve, especially manufacturing

19

activity. We think that emerging markets will show a disproportionate increase
in the consumption of steel and nonferrous metals, and we are well-positioned to
take advantage of these markets.

In June 2003, our subsidiary, Commercial Metals (International) AG was selected
as the preferred bidder to continue with exclusive negotiations to buy 71.1% of
the outstanding shares of Huta Zawiercie, S.A. in Zawiercie, Poland. Huta
Zawiercie operates a steel minimill similar to those operated by our steel
group. Its annual capacity is about 1 million tons consisting of mainly rebar
and wire rod products. We expect that if a transaction occurs, we will pay cash
for the shares. The transaction is subject to the satisfactory completion of due
diligence reviews, negotiation of a definitive sales and purchase agreement and
possibly regulatory approvals. There can be no assurance that this possible
transaction will be consummated or that the terms or results of any transaction
will be advantageous to us. Also, we can provide no assurance with respect to
the timing, value or final determination to proceed.

This outlook and the liquidity and capital resources section contain
forward-looking statements regarding the outlook for our financial results
including net earnings, product pricing and demand, production and shipping
rates, interest rates, cost of raw materials, inventory costing, results of
litigation, construction activity, and general market conditions. These
forward-looking statements can generally be identified by phrases such as we
"expect", "anticipate", "believe", "presume", "think", "plan to", "should",
"likely", "appear", "projects", 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:

o interest rate changes

o construction activity

o litigation claims and settlements

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

o metals pricing over which we exert little influence

o increased capacity and product availability from competing
steel minimills and other steel suppliers including import
quantities and pricing

o court decisions

o industry consolidation or changes in production capacity or
utilization

o global factors including credit availability and political
uncertainties

o currency fluctuations

o energy and insurance prices

o decisions by governments impacting the level of steel imports
and pace of overall economic activity

o inability to consummate acquisitions on favorable terms or to
successfully operate acquired businesses

LIQUIDITY AND CAPITAL RESOURCES -

We discuss liquidity and capital resources on a consolidated basis. Our
discussion includes the sources and uses of our three operating segments and
centralized corporate functions. We have a centralized treasury function and use
inter-company loans to efficiently manage the short-term cash needs of our
operating divisions. We invest any excess funds centrally.

We rely upon cash flows from operating activities, and to the extent necessary,
external short-term financing sources. Our short-term financing sources include
commercial paper, sales of certain accounts receivable and borrowing under our
bank credit facilities. From time to time, we have issued long-term public and
private debt placements. Our investment grade credit ratings and general
business conditions affect our access to external financing on a cost-effective
basis. Depending on the price of our common stock, we may realize significant
cash flows from the exercise of stock options.

Moody's Investors Service (P-2), Standard & Poor's Corporation (A-2) and Fitch
(F-2) rate our $174.5 million commercial paper program in the second highest
category. To support our commercial paper program, we have unsecured
contractually committed revolving credit agreements with a group of eight

20

banks. Our $129.5 million facility expires in August 2003, and our $45 million
facility expires in August 2004. We plan to continue our commercial paper
program and the revolving credit agreements in comparable amounts to support the
commercial paper program.

For added flexibility, we may secure financing through securitized sales of
certain accounts receivable in an amount not to exceed $130 million and direct
sales of accounts receivable. We continually sell accounts receivable on an
ongoing basis to replace those receivables that have been collected from our
customers. Our long-term public debt was $257 million at May 31, 2003 and is
investment grade rated by Standard & Poors' Corporation (BBB), Fitch (BBB) and
by Moody's Investors Services (Baa1). We have access to the public markets for
potential refinancing or the issuance of additional long-term debt. Also, we
have numerous informal, uncommitted credit facilities available from domestic
and international banks. These credit facilities are priced at current market
rates.

Credit ratings affect our ability to obtain short- and long-term financing and
the cost of such financing. If the rating agencies were to reduce our credit
ratings, we would pay higher financing costs and probably would have less
availability of the informal, uncommitted facilities. In determining our credit
ratings, the rating agencies consider a number of both quantitative and
qualitative factors. These factors include earnings, fixed charges such as
interest, cash flows, total debt outstanding, off balance sheet obligations and
other commitments, total capitalization and various ratios calculated from these
factors. The rating agencies also consider predictability of cash flows,
business strategy, industry condition and contingencies. We are committed to
maintaining our investment grade ratings.

Certain of our financing agreements include various covenants. The most
restrictive of these covenants requires us to maintain an interest coverage
ratio of greater than three times and a debt to capitalization ratio of 55%, as
defined in the financing agreement. A few of the agreements provide that if we
default on the terms of another financing agreement, it is considered a default
under these agreements. We have complied with the requirements, including the
covenants of our financing agreements as of and for the three months ended May
31, 2003.

Our revolving credit agreements and accounts receivable securitization agreement
include ratings triggers. The trigger in the revolving credit agreements is
solely a means to reset pricing for facility fees and, if a borrowing occurs, on
loans. Within the accounts receivable securitization agreement, the ratings
trigger is contained in a "termination event", but the trigger is set at
catastrophic levels. The trigger requires a combination of ratings actions on
behalf of two independent rating agencies and is set at levels seven ratings
categories below our current rating.

Our manufacturing and recycling businesses are capital intensive. Our capital
requirements include construction, purchases of equipment and maintenance
capital at existing facilities. We plan to invest in new operations. We also
plan to invest in working capital to support the growth of our businesses and
pay dividends to our stockholders.

We continue to assess alternative means of raising capital, including potential
dispositions of under-performing or non-strategic assets. Any potential future
major acquisitions could require additional financing from external sources
including the issuance of common or preferred stock.

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. We use futures
or forward contracts as needed to mitigate the risks from fluctuations in
foreign currency exchange rates and metals commodity prices. See Note G,
Derivatives and Risk Management, to the condensed consolidated financial
statements.

The volume and pricing of orders from our U.S. customers in the manufacturing
and construction sectors affect our cash flows from operating activities. Our
international marketing and distribution operations also significantly affect
our cash flows from operating activities. The weather can influence the volume
of

21

products we ship in any given period. Also, the general economy, the strength of
the U.S. dollar, governmental action, and various other factors beyond our
control influence our volume and prices. Periodic fluctuations in our prices and
volumes can result in variations in cash flows from operations. Despite these
fluctuations, we have historically relied on operating activities as a steady
source of cash.

We used $9.5 million of net cash flows in our operating activities for the nine
months ended May 31, 2003 as compared with $45.0 million of net cash flows
provided from our operating activities for the nine months ended May 31, 2002.
Our cash flows from operations were lower due to lower net earnings. We used the
cash from our operations for our working capital needs during the nine months
ended May 31, 2003. Net working capital, which is the difference between our
current assets of $776 million and our current liabilities of $391 million,
increased to $385 million at May 31, 2003. Working capital at August 31, 2002
(current assets of $794 million less current liabilities of $415 million) was
$379 million. Accounts receivable were higher in all segments, but primarily in
our international marketing and distribution operations. Also, inventories in
marketing and distribution increased mostly due to higher sales orders from
outside of the United States. During the nine months ended May 31, 2003, we paid
more bonuses and other discretionary expenses, which had been accrued at August
31, 2002, than we did during the nine months ended May 31, 2002. Also, we paid
$9.6 million during the nine months ended May 31, 2003 relating to an adverse
trial judgment (see Note H, Contingencies, to the condensed consolidated
financial statements). As a result, our accrued expenses decreased during the
nine months ended May 31, 2003.

We invested $35.9 million in property, plant and equipment during the nine
months ended May 31, 2003, $7.8 million (28%) more than the nine months ended
May 31, 2002. The increase was primarily due to further investment in our rebar
fabrication operations and additional equipment at our steel and copper tube
minimills. In addition, we acquired the operating assets of the Denver, Colorado
location of Symons Corporation in May, 2003, for $5.6 million. In 2002, we
acquired the remaining shares of the Coil Steels Group (CSG) for $6.8 million.
We expect our capital spending for fiscal 2003 to be less than our $87 million
budget, including both new construction and acquisitions to expand our
downstream businesses in the United States. We assess our capital spending each
quarter and reevaluate our requirements based upon current and expected results.
We believe that our capital spending may be about $57 million for fiscal 2003.

During the nine months ended May 31, 2003, we sold $45 million of accounts
receivable and reduced our temporary investments to help meet our working
capital requirements, purchase property, plant and equipment and acquire our
common stock for the treasury. We had no short-term borrowings at May 31, 2003
or 2002. We have no significant amounts due on our long-term debt until July
2005. The sales of accounts receivable to financial institutions included $27.1
million in our international subsidiaries. See Note C, Sales of Accounts
Receivable, to the condensed consolidated financial statements.

At May 31, 2003, 27,868,176 common shares were issued and outstanding, with
4,396,990 held in our treasury. We paid dividends of $6.8 million during the
nine months ended May 31, 2003, compared to the $5.2 million paid during 2002.
During the nine months ended May 31, 2003, we purchased 951,410 shares of our
common stock at an average price of $15.36 per share. These shares were held in
our treasury.

We believe that we have sufficient liquidity for fiscal 2003 and the foreseeable
future.

22

CONTRACTUAL OBLIGATIONS

The following table represents our contractual obligations as of May 31, 2003
(dollars in thousands):

* Cash obligations herein are not discounted.

(1) Total amounts are included in the May 31, 2003 condensed consolidated
balance sheet. See Note E, Long-Term Debt, to the condensed
consolidated financial statements.

(2) Includes minimum lease payment obligations for noncancelable equipment
and real-estate leases in effect as of May 31, 2003.

(3) About 55% of these purchase obligations are for inventory items to be
sold in the ordinary course of business; most of the remainder are for
supplies associated with normal revenue-producing activities.

At May 31, 2003, we received $45.0 million of net funding from the sales of
accounts receivable. See Note C, Sales of Accounts Receivable, to the condensed
consolidated financial statements. If we had terminated the accounts receivable
programs on May 31, 2003 we would have to pay the first $39.9 million of
collections from accounts sold to third party financial institutions. We have
complied with the terms of these programs as of, and for the nine months ended
May 31, 2003.

Other Commercial Commitments

We maintain stand-by letters of credit to provide support for our own
commitments to perform in certain instances when our customers and suppliers
request. Cash deposits of $10.2 million included in other current assets on the
condensed consolidated balance sheet collateralized a portion of our outstanding
letters of credit. All of the commitments expire within one year.

At the request of a customer and its surety bond issuer, we have agreed to
indemnify the surety against all costs the surety may incur should our customer
fail to perform its obligations under construction contracts covered by payment
and performance bonds issued by the surety. We are the customer's primary
supplier of steel, and steel is a substantial portion of our customer's cost to
perform the contracts. We believe we have adequate controls to monitor the
customer's performance under the contracts including payment for the steel we
supply. As of May 31, 2003, the surety had issued bonds in the total amount
(without reduction for the work performed to date) of $11.9 million which are
subject to our guaranty obligation under the indemnity agreement. See Note B,
Accounting Policies, to the condensed consolidated financial statements.

ACCOUNTING POLICIES-

See Note B, Accounting Policies, to the condensed consolidated financial
statements.

23

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required hereunder for the Company is not significantly
different from the information set forth in Item 7a. Quantitative and
Qualitative Disclosures About Market Risk included in the Company's Annual
Report of Form 10-K for the year ended August 31, 2002, filed with the
Securities Exchange Commission, and is therefore not presented herein.

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

24

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The term
"disclosure controls and procedures" is defined in Rule 13a-14(c) 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 a date within 90 days before the filing of 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.

(b) Changes in Internal Controls. There were no significant
changes to our internal controls or in other factors that could significantly
affect our internal controls subsequent to the date of their evaluation by our
Chief Executive Officer and our Chief Financial Officer, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

25

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 ending August 31, 2002, filed November 26, 2002, (10-K Legal Proceedings)
and the quarterly report on Form 10-Q for the period ended February 28, 2003,
filed April 11, 2003, (2nd quarter 10-Q Legal Proceedings) with the Securities
and Exchange Commission.

Subsequent to May 31, the Company's subsidiary, SMI-Owen Steel Company,
Inc., (SMI-Owen) settled all disputes between SMI-Owen, Fluor Daniel, Inc., and
Aladdin Gaming, LLC, arising out of the construction of a large hotel and casino
complex. The settlement, which is subject to approval by the bankruptcy court
with jurisdiction over Aladdin Gaming's bankruptcy case, provides that $3.5
million shall be paid to Aladdin Gaming, LLC and Fluor Daniel, Inc., of which
SMI-Owen shall pay $1.25 million and an insurance company $2.25 million. This
settlement resolves all material claims asserted against SMI-Owen arising out of
the project. SMI-Owen's pending lawsuit against the insurance broker on the
project for insurance benefits which SMI-Owen did not receive because of the
broker's acts, errors, omissions and other conduct is proceeding.

During the period ended May 31, 2003, the Company settled a September,
2002, administrative complaint filed by the EPA described more fully in the 10-K
Legal Proceedings alleging that the Company violated certain provisions of the
Clean Air Act. In addition, subsequent to May 31, 2003, the Company's
subsidiary, Structural Metals, Inc., settled a dispute with the Texas Commission
on Environmental Quality, described more fully in the 2nd quarter 10-Q Legal
Proceedings, pursuant to an Agreed Order. Each of these settlements resulted in
a monetary sanction of less than $100,000.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

ITEM 5. OTHER INFORMATION

Not Applicable

26

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits furnished pursuant to Item 601 of Regulation S-K.

99.1 Certification of Principal Executive Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certification of Principal Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

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
------------------------------
July 15, 2003 William B. Larson
Vice President
& Chief Financial Officer

Malinda G. Passmore
------------------------------
July 15, 2003 Malinda G. Passmore
Controller

27

SECTION 302 CERTIFICATIONS

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Stanley A. Rabin, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

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

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: July 15, 2003

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

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, William B. Larson, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

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

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: July 15, 2003

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