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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549





FORM 10-Q



(Mark One)





|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------



For the quarterly period ended February 28, 2005



OR



|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------------



For the transition period from
 to





Commission File Number 1-4887







TEXAS INDUSTRIES, INC.

(Exact name of registrant as specified in the charter)





|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 75-0832210                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)





1341 West Mockingbird Lane, Suite 700W, Dallas, Texas 75247-6913

(Address of principal
executive offices)                                 (Zip Code)





Registrants telephone number, including area code (972) 647-6700











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.  YesX  No



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YesX  No



There were 22,679,649 shares of the Registrants Common
Stock, $1.00 par value, outstanding as of April 4, 2005.



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INDEX



TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial StatementsConsolidated Balance Sheets -- February 28, 2005 and May 31, 2004

3Consolidated Statements of Operations -- three months and nine months endedFebruary 28, 2005 and February 29, 2004

4Consolidated Statements of Cash Flows -- nine months ended February 28, 2005and February 29, 2004

5Notes to Consolidated Financial Statements

6Report of Independent Registered Public Accounting Firm

21Item 2.

Managements Discussion and Analysis of Financial Conditionand Results of Operations

22Item 3.

Quantitative and Qualitative Disclosures About Market Risk -- the information requiredby this item is included in Item
2

--Item 4.

Controls and Procedures

29PART II. OTHER INFORMATIONItem 1.

Legal Proceedings

29Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29Item 6.

Exhibits

30SIGNATURES

31




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CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                           |  |                         |           |   |         |   |           |  
|------------------------------------------ |  | ----------------------- | --------- | - | ------- | - | --------- | -
|                                           |  | (Unaudited)February 28, |           |   | May 31, |  
|                                           | 
|In thousands                               |  | 2005                    |           |   | 2004    |  
|                                           | 
|                                           |  |                        
|ASSETS                                     |  |                         |           |   |         |   |           |  
|CURRENT ASSETS                             |  |                         |           |   |         |   |           |  
|Cash and cash equivalents                  |  | $                       | 164,651   |   |         | $ | 141,628   |  
|Accounts receivable - net                  |  |                         | 214,844   |   |         |   | 211,535   |  
|Inventories                                |  |                         | 332,525   |   |         |   | 266,533   |  
|Deferred income taxes and prepaid expenses |  |                         | 43,066    |   |         |   | 34,954    |  
|                                           |  |                         |           |   |         |   |           |  
|TOTAL CURRENT ASSETS                       |  |                         | 755,086   |   |         |   | 654,650   |  
|                                           |  |                        
|OTHER ASSETS                               |  |                         |           |   |         |   |           |  
|Goodwill                                   |  |                         | 146,474   |   |         |   | 146,474   |  
|Real estate and investments                |  |                         | 107,926   |   |         |   | 47,006    |  
|Deferred charges and intangibles           |  |                         | 28,286    |   |         |   | 32,354    |  
|                                           |  |                         |           |   |         |   |           |  
|                                           |  |                         | 282,686   |   |         |   | 225,834   |  
|PROPERTY, PLANT AND EQUIPMENT              |  |                         |           |   |         |   |           |  
|Land and land improvements                 |  |                         | 220,613   |   |         |   | 220,812   |  
|Buildings                                  |  |                         | 101,036   |   |         |   | 101,192   |  
|Machinery and equipment                    |  |                         | 1,718,699 |   |         |   | 1,733,065 |  
|Construction in progress                   |  |                         | 44,529    |   |         |   | 24,405    |  
|                                           |  |                         |           |   |         |   |           |  
|                                           |  |                         | 2,084,877 |   |         |   | 2,079,474 |  
|Less depreciation and depletion            |  |                         | 1,044,791 |   |         |   | 1,015,825 |  
|                                           |  |                         |           |   |         |   |           |  
|                                           |  |                         | 1,040,086 |   |         |   | 1,063,649 |  
|                                           |  |                         |           |   |         |   |           |  
|                                           |  | $                       | 2,077,858 |   |         | $ | 1,944,133 |  
|                                           |  |                         |           |   |         |   |           |  
|                                           |  |                        
|LIABILITIES AND SHAREHOLDERS EQUITY       |  |                         |           |   |         |   |           |  
|CURRENT LIABILITIES                        |  |                         |           |   |         |   |           |  
|Accounts payable                           |  | $                       | 116,158   |   |         | $ | 108,557   |  
|Accrued interest, wages and other items    |  |                         | 61,210    |   |         |   | 78,699    |  
|Current portion of long-term debt          |  |                         | 687       |   |         |   | 699       |  
|                                           |  |                         |           |   |         |   |           |  
|TOTAL CURRENT LIABILITIES                  |  |                         | 178,055   |   |         |   | 187,955   |  
|                                           |  |                        
|LONG-TERM DEBT                             |  |                         | 603,507   |   |         |   | 598,412   |  
|                                           |  |                        
|CONVERTIBLE SUBORDINATED DEBENTURES        |  |                         | 199,937   |   |         |   | 199,937   |  
|                                           |  |                        
|DEFERRED INCOME TAXES AND OTHER CREDITS    |  |                         | 207,375   |   |         |   | 195,845   |  
|                                           |  |                        
|SHAREHOLDERS EQUITY                       |  |                         |           |   |         |   |           |  
|Common stock, $1 par value                 |  |                         | 25,067    |   |         |   | 25,067    |  
|Additional paid-in capital                 |  |                         | 284,646   |   |         |   | 261,455   |  
|Retained earnings                          |  |                         | 646,486   |   |         |   | 568,596   |  
|Cost of common stock in treasury           |  |                         | (62,733   | ) |         |   | (88,652   | )
|Pension liability adjustment               |  |                         | (4,482    | ) |         |   | (4,482    | )
|                                           |  |                         |           |   |         |   |           |  
|                                           |  |                         | 888,984   |   |         |   | 761,984   |  
|                                           |  |                         |           |   |         |   |           |  
|                                           |  | $                       | 2,077,858 |   |         | $ | 1,944,133 |  
|                                           |  |                         |           |   |         |   |           |  





See notes to consolidated financial statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|------------------------------------------------------------ |  | - | ------------------ | - |  | - | ----------------- | - |  | - | ------------ | - |  | - | ------------ | -
|                                                             |  |   | Three months ended |   |  |   | Nine months ended |  
|                                                             |  |   | February 28,       |   |  |   | February 29,      |   |  |   | February 28, |   |  |   | February 29, |  
|                                                             | 
|In thousands except per share                                |  |   | 2005               |   |  |   | 2004              |   |  |   | 2005         |   |  |   | 2004         |  
|                                                             | 
|                                                             |  |   |                    |  
|NET SALES                                                    |  | $ | 440,158            |   |  | $ | 407,970           |   |  | $ | 1,383,729    |   |  | $ | 1,152,567    |  
|                                                             |  |   |                    |  
|COSTS AND EXPENSES (INCOME)                                  |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Cost of products sold                                        |  |   | 384,044            |   |  |   | 368,746           |   |  |   | 1,156,099    |   |  |   | 1,055,250    |  
|Selling, general and administrative                          |  |   | 24,537             |   |  |   | 22,877            |   |  |   | 77,313       |   |  |   | 73,152       |  
|Interest                                                     |  |   | 17,845             |   |  |   | 17,961            |   |  |   | 51,923       |   |  |   | 55,884       |  
|Loss on early retirement of debt                             |  |   | --                 |   |  |   | --                |   |  |   | --           |   |  |   | 11,246       |  
|Other income                                                 |  |   | (8,930             | ) |  |   | (36,601           | ) |  |   | (24,221      | ) |  |   | (42,887      | )
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                             |  |   | 417,496            |   |  |   | 372,983           |   |  |   | 1,261,114    |   |  |   | 1,152,645    |  
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|INCOME (LOSS) BEFORE INCOMETAXES AND ACCOUNTING CHANGE       |  |   | 22,662             |   |  |   | 34,987            |   |  |   | 122,615      |   |  |   | (78          | )
|                                                             |  |   |                    |  
|Income taxes                                                 |  |   | 6,672              |   |  |   | 14,098            |   |  |   | 39,785       |   |  |   | 124          |  
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|INCOME (LOSS) BEFORE ACCOUNTINGCHANGE                        |  |   | 15,990             |   |  |   | 20,889            |   |  |   | 82,830       |   |  |   | (202         | )
|                                                             |  |   |                    |  
|Cumulative effect of accounting change - net of income taxes |  |   | --                 |   |  |   | --                |   |  |   | --           |   |  |   | (1,071       | )
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|NET INCOME (LOSS)                                            |  | $ | 15,990             |   |  | $ | 20,889            |   |  | $ | 82,830       |   |  | $ | (1,273       | )
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                             |  |   |                    |  
|Basic earnings (loss) per share                              |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Income (loss) before accounting change                       |  | $ | .71                |   |  | $ | .99               |   |  | $ | 3.79         |   |  | $ | (.01         | )
|Cumulative effect of accounting change                       |  |   | --                 |   |  |   | --                |   |  |   | --           |   |  |   | (.05         | )
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Net income (loss)                                            |  | $ | .71                |   |  | $ | .99               |   |  | $ | 3.79         |   |  | $ | (.06         | )
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                             |  |   |                    |  
|Diluted earnings (loss) per share                            |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Income (loss) before accounting change                       |  | $ | .68                |   |  | $ | .92               |   |  | $ | 3.45         |   |  | $ | (.01         | )
|Cumulative effect of accounting change                       |  |   | --                 |   |  |   | --                |   |  |   | --           |   |  |   | (.05         | )
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Net income (loss)                                            |  | $ | .68                |   |  | $ | .92               |   |  | $ | 3.45         |   |  | $ | (.06         | )
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                             |  |   |                    |  
|Average shares outstanding                                   |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Basic                                                        |  |   | 22,413             |   |  |   | 21,189            |   |  |   | 21,858       |   |  |   | 21,163       |  
|Diluted                                                      |  |   | 26,119             |   |  |   | 24,688            |   |  |   | 25,562       |   |  |   | 21,163       |  
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                             |  |   |                    |  
|Cash dividends per share                                     |  | $ | .075               |   |  | $ | .075              |   |  | $ | .225         |   |  | $ | .225         |  
|                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  





See notes to consolidated financial statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                       |  |   |                   |   |  |   |              |  
|------------------------------------------------------ |  | - | ----------------- | - |  | - | ------------ | -
|                                                       |  |   | Nine months ended |  
|                                                       |  |   | February 28,      |   |  |   | February 29, |  
|                                                       | 
|In thousands                                           |  |   | 2005              |   |  |   | 2004         |  
|                                                       | 
|                                                       |  |  
|OPERATING ACTIVITIES                                   |  |   |                   |   |  |   |              |  
|Net income (loss)                                      |  | $ | 82,830            |   |  | $ | (1,273       | )
|Adjustments to reconcile net income (loss) to net cash |  |   |                   |   |  |   |              |  
|Cumulative effect of accounting change                 |  |   | --                |   |  |   | 1,071        |  
|Loss on early retirement of debt                       |  |   | --                |   |  |   | 11,246       |  
|Gain on disposal of assets                             |  |   | (5,451            | ) |  |   | (35,516      | )
|Depreciation, depletion and amortization               |  |   | 71,244            |   |  |   | 72,897       |  
|Deferred income taxes (benefit)                        |  |   | 22,691            |   |  |   | (731         | )
|Income tax benefit from stock option exercises         |  |   | 8,000             |   |  |   | --           |  
|Other - net                                            |  |   | 476               |   |  |   | 1,214        |  
|Changes in operating assets and liabilities            |  |   |                   |   |  |   |              |  
|Receivables repurchased                                |  |   | --                |   |  |   | (115,514     | )
|Accounts receivable - net                              |  |   | (3,185            | ) |  |   | (19,249      | )
|Inventories and prepaid expenses                       |  |   | (71,512           | ) |  |   | 15,082       |  
|Accounts payable and accrued liabilities               |  |   | (10,056           | ) |  |   | 5,186        |  
|Other credits                                          |  |   | 2,456             |   |  |   | 4,608        |  
|                                                       |  |   |                   |   |  |   |              |  
|Net cash provided (used) by operations                 |  |   | 97,493            |   |  |   | (60,979      | )
|                                                       |  |  
|INVESTING ACTIVITIES                                   |  |   |                   |   |  |   |              |  
|Capital expenditures                                   |  |   | (48,792           | ) |  |   | (24,725      | )
|Proceeds from disposal of assets                       |  |   | 6,621             |   |  |   | 40,065       |  
|Investments in life insurance contracts                |  |   | (59,094           | ) |  |   | 213          |  
|Other - net                                            |  |   | (1,159            | ) |  |   | (1,788       | )
|                                                       |  |   |                   |   |  |   |              |  
|Net cash provided (used) by investing                  |  |   | (102,424          | ) |  |   | 13,765       |  
|                                                       |  |  
|FINANCING ACTIVITIES                                   |  |   |                   |   |  |   |              |  
|Long-term borrowings                                   |  |   | --                |   |  |   | 718,097      |  
|Debt retirements                                       |  |   | (357              | ) |  |   | (592,052     | )
|Debt issuance costs                                    |  |   | --                |   |  |   | (16,373      | )
|Debt retirement costs                                  |  |   | --                |   |  |   | (8,505       | )
|Interest rate swap termination costs                   |  |   | (6,315            | ) |  |   | --           |  
|Proceeds from stock option exercises                   |  |   | 39,565            |   |  |   | 1,678        |  
|Common dividends paid                                  |  |   | (4,939            | ) |  |   | (4,748       | )
|Other - net                                            |  |   | --                |   |  |   | (285         | )
|                                                       |  |   |                   |   |  |   |              |  
|Net cash provided by financing                         |  |   | 27,954            |   |  |   | 97,812       |  
|                                                       |  |   |                   |   |  |   |              |  
|Increase in cash and cash equivalents                  |  |   | 23,023            |   |  |   | 50,598       |  
|                                                       |  |  
|Cash and cash equivalents at beginning of period       |  |   | 141,628           |   |  |   | 6,204        |  
|                                                       |  |   |                   |   |  |   |              |  
|Cash and cash equivalents at end of period             |  | $ | 164,651           |   |  | $ | 56,802       |  
|                                                       |  |   |                   |   |  |   |              |  





See notes to consolidated financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Texas Industries, Inc. and subsidiaries (unless the context indicates otherwise, collectively, the Company or TXI) is a leading supplier of construction materials through two business segments:
cement, aggregate and concrete products (the CAC segment); and structural steel and steel bar products (the Steel segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, ready-mix
concrete, expanded shale and clay aggregate, and other products from facilities concentrated in Texas, Louisiana and California. Through the Steel segment, the Company produces and sells structural steel, piling products, special bar quality
products, merchant bar quality rounds, reinforcing bar and channels from facilities located in Texas and Virginia.



On December 14, 2004, the Companys Board of Directors approved a plan to spin-off its wholly-owned steel operations. While many
details of the spin-off have not been finalized, the steel operations will be placed in a new holding company named Chaparral Steel Company, whose stock will be distributed to the Companys shareholders in a transaction that is expected to take
the form of a tax-free stock dividend. Chaparral Steel Company has filed a Registration Statement on Form 10 with the Securities and Exchange Commission. The transaction is subject to the following: confirmation that the distribution will be
tax-free, continued favorable market conditions, satisfaction of U.S. Securities and Exchange Commission requirements and other customary conditions. It is expected that the distribution will be completed during the quarter ending August 31, 2005.



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended February 28, 2005, are not necessarily indicative of the results that may be expected for the year ended May 31, 2005. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended May 31, 2004.



Principles of Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and all
subsidiaries except a subsidiary trust in which the Company has a variable interest but is not the primary beneficiary. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.



Estimates. The preparation of financial
statements and accompanying notes in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.



Cash and Cash Equivalents. Investments with maturities
of less than 90 days when purchased are classified as cash equivalents and consist primarily of money market funds and investment grade commercial paper issued by major corporations and financial institutions. Cash and cash equivalents includes
$24.7 million used to support letters of credit.



Receivables.Management evaluates the ability to collect accounts receivable based on a combination of factors. A reserve for doubtful accounts is maintained based on the length of time receivables are past due or the status of a
customers financial condition. If the Company is aware of a specific customers inability to make required payments, specific amounts are added to the reserve.



Environmental Liabilities.The Company is subject to environmental laws and regulations established
by federal, state and local authorities, and makes provision for the estimated costs related to compliance when it is probable that a reasonably estimable liability has been incurred.



Legal Contingencies.The Company and its subsidiaries are defendants in lawsuits which arose in the
normal course of business, and make provision for the estimated loss from any claim or legal proceeding when it is probable that a reasonably estimable liability has been incurred.



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Long-lived Assets.Management reviews long-lived assets for impairment whenever
changes in circumstances indicate that the carrying amount of the assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows
expected to be generated by the asset and are significantly impacted by estimates of future prices for the Companys products, capital needs, economic trends and other factors.



Property, plant and equipment is recorded at cost. Provisions for depreciation are computed generally using
the straight-line method. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. Useful lives for the Companys primary operating facilities range from 10 to 20 years.
Maintenance and repairs are charged to expense as incurred. Costs incurred for scheduled shutdowns to refurbish the Steel facilities are amortized over the benefited period, typically 12 months.



Goodwill. Management tests goodwill for impairment at
least annually by each reporting unit. If the carrying amount of the goodwill exceeds its fair value an impairment loss is recognized. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the
applicable reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for the Companys products, capital needs, economic
trends and other factors. Goodwill identified with CACs California cement operations resulted from the acquisition of Riverside Cement Company. Goodwill identified with Steels Texas operations resulted from the acquisition of Chaparral
Investments, Inc., formerly known as Chaparral Steel Company. In each case the fair value of the respective reporting unit exceeds its carrying value. The carrying value of CAC goodwill was $61.3 million and the carrying value of Steel goodwill was
$85.2 million at both February 28, 2005 and May 31, 2004.



Real Estate and Investments.Surplus real estate and real estate acquired for development of high quality industrial, office or multi-use parks totaled $10.1 million and $11.2 million at February 28, 2005 and
May 31, 2004, respectively.



Investments are
composed primarily of life insurance contracts purchased in connection with certain Company benefit plans. The contracts, recorded at their net cash surrender value, totaled $96.0 million (net of distributions of $1.3 million) at February 28, 2005
and $34.2 million (net of distributions of $52.5 million) at May 31, 2004. During the quarter ended August 31, 2004, distributed amounts totaling $51.2 million were repaid. Charges incurred on the distributions of $100,000 and $2.5 million in the
nine-month periods ended February 28, 2005 and February 29, 2004, respectively, were included in interest expense.



Deferred Charges and Intangibles.Deferred charges are composed primarily of debt issuance costs that totaled $17.8 million and
$19.7 million at February 28, 2005 and May 31, 2004, respectively. The costs are associated with various debt issues and amortized over the term of the related debt.



Intangibles are composed of non-compete agreements and other intangibles with finite lives being amortized
on a straight-line basis over periods of 5 to 15 years. Their carrying value, adjusted for write-offs, totaled $1.9 million (net of accumulated amortization of $2.8 million) at February 28, 2005 and $2.1 million (net of accumulated amortization of
$3.8 million) at May 31, 2004. Amortization expense incurred was $300,000 in both nine-month periods ended February 28, 2005 and February 29, 2004. Estimated amortization expense for each of the five succeeding years is $300,000 per year.



Other Credits.Other credits of $57.2
million at February 28, 2005 and $68.5 million at May 31, 2004 are composed primarily of liabilities related to the Companys retirement plans, deferred compensation agreements and asset retirement obligations.



Asset Retirement Obligations.Effective June 1, 2003,
the Company adopted Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, which applies to legal obligations associated with the retirement of long-lived assets.



SFAS No. 143 requires that the fair value of a liability
for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through a charge to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will
recognize a gain or loss on settlement.



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The Company incurs legal obligations for asset retirement as part of its normal CAC and
Steel operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Prior to the adoption of SFAS No. 143, the Company generally accrued for land reclamation obligations related to its aggregate mining
process on the unit of production basis and for its other obligations as incurred. Determining the amount of an asset retirement liability requires estimating the future cost of contracting with third parties to perform the obligation. The estimate
is significantly impacted by, among other considerations, managements assumptions regarding the scope of the work required, labor costs, inflation rates, market-risk premiums and closure dates. The initial application of the new rules at June
1, 2003, resulted in an increase in net property, plant and equipment of $500,000, a net increase in asset retirement obligation liabilities of $2.2 million and a pretax cumulative charge of $1.7 million.



Changes in the Companys asset retirement obligations
for the nine-month periods ended February 28, 2005 and February 29, 2004, are as follows:





|                               |  |   |       |   |  |   |       |  
|------------------------------ |  | - | ----- | - |  | - | ----- | -
|                               | 
|In thousands                   |  |   | 2005  |   |  |   | 2004  |  
|                               | 
|                               |  |  
|Balance at beginning of period |  | $ | 4,992 |   |  | $ | --    |  
|Initial obligation             |  |   | --    |   |  |   | 4,092 |  
|Revisions                      |  |   | --    |   |  |   | 554   |  
|Accretion expense              |  |   | 282   |   |  |   | 267   |  
|Settlements                    |  |   | (253  | ) |  |   | (164  | )
|                               |  |   |       |   |  |   |       |  
|Balance at end of period       |  | $ | 5,021 |   |  | $ | 4,749 |  
|                               |  |   |       |   |  |   |       |  





Pension Liability Adjustment.The pension liability adjustment to shareholders equity of $4.5 million at both February 28,
2005 and May 31, 2004 (net of tax of $2.4 million) relates to a defined benefit retirement plan covering approximately 600 employees and retirees of an acquired subsidiary. Comprehensive income or loss consists of net income or loss and the pension
liability adjustment to shareholders equity. Comprehensive income (loss) was the same as net income (loss) for the three-month and nine-month periods ended February 28, 2005 and February 29, 2004.



Net Sales. Sales are recognized when title has
transferred and products are delivered. The Company includes delivery fees in the amount it bills customers to the extent needed to recover the Companys cost of freight and delivery. Net sales are presented as revenues including these delivery
fees.



Other Income.Other
income in the three-month and nine-month periods ended February 28, 2005, includes gains of $3.2 million and $7.6 million, respectively, from routine sales of surplus operating assets and real estate. Other income in the nine-month period ended
February 28, 2005 also includes a gain of $6.2 million from the sale of emissions credits associated with the Companys expanded shale and clay aggregate operation in south Texas.



Other income in the three-month and nine-month periods ended February 29, 2004 includes a gain of $34.4
million from the sale of the Companys Texas and Louisiana brick production facilities. Other income in the nine-month period ended February 29, 2004, also includes $4.2 million from the Companys litigation against certain graphite
electrode suppliers.



Income Taxes.
Accounting for income taxes uses the liability method of recognizing and classifying deferred income taxes. The Company joins in filing a consolidated return with its subsidiaries. Current and deferred tax expense is allocated among the members of
the group based on a stand-alone calculation of the tax of the individual member.



Earnings Per Share(EPS). Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding during the period including certain
contingently issuable shares.



Contingently
issuable shares relate to deferred compensation agreements in which directors elected to defer annual and meeting fees or executives elected to defer incentive compensation and vested shares under the Companys former stock awards program. The
deferred compensation is denominated in shares of the Companys common stock and issued in accordance with the terms of the agreement subsequent to retirement or separation from the Company. The shares are considered contingently issuable
because the director or executive has an unconditional right to the shares to be issued. Vested stock award shares are issued in the year in which the employee reaches age 60.



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##### Table of Contents

Diluted EPS adjusts net income and the outstanding shares for the dilutive effect of
convertible subordinated debentures, stock options and awards.



Basic and Diluted EPS are calculated as follows:



|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|-------------------------------------------------- |  | - | ------------------ |  | - | ----------------- |  | - | ------------ |  | - | ------------ | -
|                                                   |  |   | Three months ended |  |   | Nine months ended | 
|                                                   |  |   | February 28,       |  |   | February 29,      |  |   | February 28, |  |   | February 29, |  
|                                                   | 
|In thousands except per share                      |  |   | 2005               |  |   | 2004              |  |   | 2005         |  |   | 2004         |  
|                                                   | 
|                                                   |  |   |                    | 
|Earnings                                           |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Income (loss) before accounting change             |  | $ | 15,990             |  | $ | 20,889            |  | $ | 82,830       |  | $ | (202         | )
|Cumulative effect of accounting change             |  |   | --                 |  |   | --                |  |   | --           |  |   | (1,071       | )
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Net income (loss)                                  |  | $ | 15,990             |  | $ | 20,889            |  | $ | 82,830       |  | $ | (1,273       | )
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|                                                   |  |   |                    | 
|Shares                                             |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Weighted-average shares outstanding                |  |   | 22,378             |  |   | 21,120            |  |   | 21,807       |  |   | 21,092       |  
|Contingently issuable shares                       |  |   | 35                 |  |   | 69                |  |   | 51           |  |   | 71           |  
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Basic weighted-average shares                      |  |   | 22,413             |  |   | 21,189            |  |   | 21,858       |  |   | 21,163       |  
|                                                   |  |   |                    | 
|Convertible subordinated debentures                |  |   | 2,888              |  |   | 2,888             |  |   | 2,888        |  |   | --           |  
|Stock option and award dilution                    |  |   | 818                |  |   | 611               |  |   | 816          |  |   | --           |  
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Diluted weighted-average shares*                   |  |   | 26,119             |  |   | 24,688            |  |   | 25,562       |  |   | 21,163       |  
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|                                                   |  |   |                    | 
|Basic earnings (loss) per share                    |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Income (loss) before accounting change             |  | $ | .71                |  | $ | .99               |  | $ | 3.79         |  | $ | (.01         | )
|Cumulative effect of accounting change             |  |   | --                 |  |   | --                |  |   | --           |  |   | (.05         | )
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Net income (loss)                                  |  | $ | .71                |  | $ | .99               |  | $ | 3.79         |  | $ | (.06         | )
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|                                                   |  |   |                    | 
|Diluted earnings (loss) per share                  |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Income (loss) before accounting change             |  | $ | .68                |  | $ | .92               |  | $ | 3.45         |  | $ | (.01         | )
|Cumulative effect of accounting change             |  |   | --                 |  |   | --                |  |   | --           |  |   | (.05         | )
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Net income (loss)                                  |  | $ | .68                |  | $ | .92               |  | $ | 3.45         |  | $ | (.06         | )
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|                                                   |  |   |                    | 
|                                                   |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|*       Shares excluded due to antidilutive effect |  |   |                    |  |   |                   |  |   |              |  |   |              |  
|Convertible subordinated debentures                |  |   | --                 |  |   | --                |  |   | --           |  |   | 2,888        |  
|Stock options and awards                           |  |   | --                 |  |   | 756               |  |   | 173          |  |   | 3,262        |  





Stock-based Compensation.The Company accounts for employee stock options using the intrinsic value method of accounting prescribed
by APB Opinion No. 25, Accounting for Stock Issued to Employees as allowed by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Generally, no expense is
recognized related to the Companys stock options because the exercise price of each option is equal to the market value of the underlying common stock on the date of grant.



In accordance with SFAS No. 123, the Company discloses the compensation cost based on the estimated fair
value at the date of grant. Compensation expense is recognized ratably over the vesting period. The weighted-average fair value of options granted in the nine-month period ended February 28, 2005 was $23.83. The fair value of each option grant was
estimated on the date of grant for purposes of the pro forma disclosures using the Black-Scholes option-pricing model based on weighted average assumptions for dividend yield of .50%, volatility factor of .345, risk-free interest rate of 3.89% and
expected life in years of 6.4.



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##### Table of Contents

If the Company had applied the fair value recognition provisions of SFAS No. 123, the
Companys net income (loss) and earnings (loss) per share would have been adjusted to the following pro forma amounts:



|                                                                                                            |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|----------------------------------------------------------------------------------------------------------- |  | - | ------------------ | - |  | - | ----------------- | - |  | - | ------------ | - |  | - | ------------ | -
|                                                                                                            |  |   | Three months ended |   |  |   | Nine months ended |  
|                                                                                                            |  |   | February 28,       |   |  |   | February 29,      |   |  |   | February 28, |   |  |   | February 29, |  
|                                                                                                            | 
|In thousands except per share                                                                               |  |   | 2005               |   |  |   | 2004              |   |  |   | 2005         |   |  |   | 2004         |  
|                                                                                                            | 
|                                                                                                            |  |   |                    |  
|Net income (loss)                                                                                           |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|As reported                                                                                                 |  | $ | 15,990             |   |  | $ | 20,889            |   |  | $ | 82,830       |   |  | $ | (1,273       | )
|Plus:   stock-based compensation included in the determination of net income (loss) as reported, net of tax |  |   | 933                |   |  |   | 1,147             |   |  |   | 2,677        |   |  |   | 1,291        |  
|Less:   fair value of stock-based compensation, net of tax                                                  |  |   | (748               | ) |  |   | (1,975            | ) |  |   | (2,645       | ) |  |   | (3,964       | )
|                                                                                                            |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Pro forma                                                                                                   |  | $ | 16,175             |   |  | $ | 20,061            |   |  | $ | 82,862       |   |  | $ | (3,946       | )
|                                                                                                            |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                                                                            |  |   |                    |  
|Basic earnings (loss) per share                                                                             |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|As reported                                                                                                 |  | $ | .71                |   |  | $ | .99               |   |  | $ | 3.79         |   |  | $ | (.06         | )
|Pro forma                                                                                                   |  |   | .72                |   |  |   | .95               |   |  |   | 3.79         |   |  |   | (.19         | )
|                                                                                                            |  |   |                    |  
|Diluted earnings (loss) per share                                                                           |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|As reported                                                                                                 |  | $ | .68                |   |  | $ | .92               |   |  | $ | 3.45         |   |  | $ | (.06         | )
|Pro forma                                                                                                   |  |   | .69                |   |  |   | .89               |   |  |   | 3.45         |   |  |   | (.19         | )





In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based Payment.
SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB Opinion No. 25. Among other items, SFAS No. 123R eliminates the use of APB Opinion No. 25 and the intrinsic value method of
accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS No. 123R
is the first reporting period beginning after June 15, 2005, which is the second quarter of the Companys fiscal year ending May 31, 2006. The Company currently expects to adopt SFAS No. 123R effective September 1, 2005 using the modified
prospective method. Under the modified prospective method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after
that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123R. Financial information for periods prior to the date of adoption of SFAS No. 123R would not be restated. The
Company currently utilizes a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, the standard also permits the use
of a lattice model. The Company has not yet determined which model it will use to measure the fair value of awards of equity instruments to employees upon the adoption of SFAS No. 123R.



The adoption of SFAS No. 123R will have a significant effect
on the Companys future results of operations. However, it will not have an impact on the Companys consolidated financial position. The impact of SFAS No. 123R on the Companys results of operations can not be predicted at this time,
because it will depend on the number of equity awards granted in the future, as well as the model used to value the awards. However, had the Company adopted the requirements of SFAS No. 123R in prior periods, the impact would have approximated the
amounts disclosed in the table above.





WORKING CAPITAL



Working capital totaled $577.0 million at February 28, 2005, compared to $466.7 million at May 31, 2004.



Accounts receivable are presented net of allowances for doubtful receivables of $3.9 million at February 28, 2005 and $5.3 million at May
31, 2004. Provisions for bad debts charged to expense were $1.2 million and $4.1 million in the nine-month periods ended February 28, 2005 and February 29, 2004, respectively. Uncollectible accounts written off amounted to $2.6 million and $2.9
million in the nine-month periods ended February 28, 2005 and February 29, 2004, respectively.



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Inventories consist of:



|                           |  |   |              |  |   |        
|-------------------------- |  | - | ------------ |  | - | -------
|                           |  |   | February 28, |  |   | May 31,
|                          
|In thousands               |  |   | 2005         |  |   | 2004   
|                          
|                           |  |  
|Finished products          |  | $ | 125,495      |  | $ | 86,395 
|Work in process            |  |   | 60,506       |  |   | 56,440 
|Raw materials and supplies |  |   | 146,524      |  |   | 123,698
|                           |  |   |              |  |   |        
|                           |  | $ | 332,525      |  | $ | 266,533
|                           |  |   |              |  |   |        





Inventories are stated at cost (not in excess of market) primarily using the last-in, first-out (LIFO) method. If the average
cost method (which approximates current replacement cost) had been used, inventory values would have been higher by $67.0 million at February 28, 2005 and $49.7 million at May 31, 2004.



In November 2004, the Financial Accounting Standards Board issued SFAS No. 151, Inventory Costs, an
amendment of ARB No. 43, Chapter 4, which will become effective for the Company beginning June 1, 2006. This standard clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be expensed as
incurred and not included in overhead. In addition, this standard requires that the allocation of fixed production overhead costs to inventory be based on the normal capacity of the production facilities. The Company is currently evaluating the
potential impact of this standard on its financial position and results of operations.



Accrued interest, wages and other items consist of:



|                         |  |   |              |  |   |        
|------------------------ |  | - | ------------ |  | - | -------
|                         |  |   | February 28, |  |   | May 31,
|                        
|In thousands             |  |   | 2005         |  |   | 2004   
|                        
|                         |  |  
|Interest                 |  | $ | 14,914       |  | $ | 28,412 
|Employee compensation    |  |   | 27,876       |  |   | 27,142 
|Income taxes             |  |   | 891          |  |   | 686    
|Property taxes and other |  |   | 17,529       |  |   | 22,459 
|                         |  |   |              |  |   |        
|                         |  | $ | 61,210       |  | $ | 78,699 
|                         |  |   |              |  |   |        





LONG-TERM DEBT



Long-term debt is comprised of the following:



|                                                                             |  |   |              |   |  |   |         |  
|---------------------------------------------------------------------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                             |  |   | February 28, |   |  |   | May 31, |  
|                                                                             | 
|In thousands                                                                 |  |   | 2005         |   |  |   | 2004    |  
|                                                                             | 
|                                                                             |  |  
|Senior secured credit facility expiring in 2007                              |  | $ | --           |   |  | $ | --      |  
|Senior notes due in 2011, interest rate 10.25%                               |  |   | 600,000      |   |  |   | 600,000 |  
|Interest rate swaps                                                          |  |   |              |   |  |   |         |  
|Fair value adjustment                                                        |  |   | --           |   |  |   | (12,570 | )
|Unamortized gains on termination                                             |  |   | 7,239        |   |  |   | 8,102   |  
|Unamortized losses on termination                                            |  |   | (6,269       | ) |  |   | --      |  
|Pollution control bonds due through 2007,interest rate 4.125% (75% of prime) |  |   | 2,835        |   |  |   | 3,175   |  
|Other                                                                        |  |   | 389          |   |  |   | 404     |  
|                                                                             |  |   |              |   |  |   |         |  
|                                                                             |  |   | 604,194      |   |  |   | 599,111 |  
|Less current maturities                                                      |  |   | 687          |   |  |   | 699     |  
|                                                                             |  |   |              |   |  |   |         |  
|                                                                             |  | $ | 603,507      |   |  | $ | 598,412 |  
|                                                                             |  |   |              |   |  |   |         |  





Maturities of long-term debt for each of the five succeeding years are $700,000 per year for 2006 and 2007, $1.5 million for 2008 and none
for 2009 and 2010.



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##### Table of Contents

Senior Secured Credit Facility.The Company has available a $100 million senior
secured credit facility expiring June 6, 2007. Borrowings bear annual interest either at the LIBOR rate plus 2.0% or the prime rate. These interest rate margins are subject to financial performance price adjustments. Commitment fees at an annual
rate of .375% are paid on the unused portion of the facility.



No borrowings were outstanding under the facility at February 28, 2005; however, $27.1 million of the facility was utilized to support letters of credit. Borrowings under the facility are limited based on the net
amounts of eligible accounts receivable. In addition, there is the requirement to meet certain financial tests and to maintain certain financial ratios if the excess availability under the facility falls below $30 million, including maintaining a
fixed charge coverage ratio and meeting a minimum tangible net worth test.



The agreement contains covenants restricting, among other things, prepayment or redemption of notes, distributions, repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness,
liens and affiliate transactions. Cash dividends paid on common stock are limited to an annual amount of $7.0 million.



The facility is collateralized by first priority liens on substantially all of the Companys existing and future acquired accounts
receivable, inventory, deposit accounts, and certain of its general intangibles. The Company may terminate the facility at any time, and under certain circumstances may be required to pay a termination fee.



Senior Notes.The senior notes represent general
unsecured senior obligations of the Company. The terms of the notes contain covenants that among other things provide for restrictions on the payment of dividends or repurchasing common stock, making certain investments, incurring additional debt or
selling preferred stock, creating liens, and transferring assets. Also, as required by the terms of the notes, the Company has reinvested through capital expenditures the net proceeds from asset sales within 360 days of their receipt. At any time
prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 110.25% of the principal amount thereof, plus accrued interest, with the net cash proceeds from certain equity
offerings. In addition, at any time on or prior to June 15, 2007, the Company may redeem all or part of the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. After June 15,
2007, the Company may redeem all or a part of the notes at a redemption price of 105.125% in 2007, 102.563% in 2008 and 100% in 2009 and thereafter.



Interest Rate Swaps.On February 14, 2005, the Company terminated its outstanding interest rate swap agreements associated with
$300 million of the senior notes resulting in a loss of $6.3 million. Gains and losses from interest rate swap terminations have been recorded as increases or decreases in the carrying value of the Companys long-term debt and are being
amortized as adjustments to interest expense over the remaining term of the senior notes.



The amount of interest paid was $66.6 million and $46.5 million in the nine-month periods ended February 28, 2005 and February 29, 2004, respectively. No interest was capitalized in the
nine-month periods ended February 28, 2005 and February 29, 2004.



CONVERTIBLE SUBORDINATED DEBENTURES



On June 5, 1998, the Company issued $206.2 million aggregate principal amount of 5.5% convertible subordinated debentures due June 30, 2028 (the Debentures). TXI Capital Trust I (the
Trust), a Delaware business trust 100% owned by the Company, issued 4,000,000 of its 5.5% Shared Preference Redeemable Securities (Preferred Securities) to the public for gross proceeds of $200 million. The combined proceeds
from the issuance of the Preferred Securities and the issuance to the Company of the common securities of the Trust were invested by the Trust in the Debentures. At February 28, 2005, 3,998,744 Preferred Securities representing an undivided
beneficial interest in $199.9 million of the $206.1 million aggregate principal amount of Debentures issued were outstanding.



The Debentures are redeemable for cash, at par, plus accrued and unpaid interest, under certain circumstances relating to federal income
tax matters or in whole or in part at the option of the Company. Upon any redemption of the Debentures, a like aggregate liquidation amount of Preferred Securities will be redeemed. Debentures are convertible at any time prior to the close of
business on June 30, 2028, at the option of the holder of the Preferred Securities into shares of the Companys common stock at a conversion rate of .72218 shares of the Companys common stock for each Preferred Security.



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Holders of the Preferred Securities are entitled to receive cumulative cash distributions
at an annual rate of $2.75 per Preferred Security (equivalent to a rate of 5.5% per annum of the stated liquidation amount of $50 per Preferred Security). The Company has guaranteed, on a subordinated basis, distributions and other payments due on
the Preferred Securities, to the extent the Trust has funds available therefor and subject to certain other limitations (the Guarantee). The Guarantee, when taken together with the obligations of the Company under the Debentures, the
Indenture pursuant to which the Debentures were issued, and the Amended and Restated Trust Agreement of the Trust (including its obligations to pay costs, fees, expenses, debts and other obligations of the Trust [other than with respect to the
Preferred Securities and the common securities of the Trust]), provide a full and unconditional guarantee of amounts due on the Preferred Securities. The Preferred Securities do not have a stated maturity date, although they are subject to mandatory
redemption upon maturity of the Debentures on June 30, 2028, or upon earlier redemption.



SHAREHOLDERS EQUITY



Common stock consists of:



|                                            |  |              |  |        
|------------------------------------------- |  | ------------ |  | -------
|                                            |  | February 28, |  | May 31,
|                                           
|In thousands                                |  | 2005         |  | 2004   
|                                           
|                                            |  |             
|Shares authorized                           |  | 40,000       |  | 40,000 
|Shares outstanding                          |  | 22,665       |  | 21,201 
|Shares held in treasury                     |  | 2,402        |  | 3,866  
|Shares reserved for stock options and other |  | 4,102        |  | 3,182  





There are authorized 100,000 shares of Cumulative Preferred Stock, no par value, of which 20,000 shares are designated $5 Cumulative
Preferred Stock (Voting), redeemable at $105 per share and entitled to $100 per share upon dissolution. An additional 25,000 shares are designated Series B Junior Participating Preferred Stock. The Series B Preferred Stock is not redeemable and
ranks, with respect to the payment of dividends and the distribution of assets, junior to (i) all other series of the Preferred Stock unless the terms of any other series shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. Pursuant
to a Rights Agreement, in November 1996, the Company distributed a dividend of one preferred share purchase right for each outstanding share of the Companys Common Stock. Each right entitles the holder to purchase from the Company one
two-thousandth of a share of the Series B Junior Participating Preferred Stock at a price of $122.50, subject to adjustment. The rights will expire on November 1, 2006 unless the date is extended or the rights are earlier redeemed or exchanged by
the Company pursuant to the Rights Agreement.



STOCK OPTION PLANS



The Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (the 2004 Plan) provides that, in addition to other types of awards, non-qualified and incentive stock options to purchase Common Stock may be granted to
directors, officers and key employees at market prices at date of grant. Options become exercisable in installments beginning one year after date of grant and expire ten years later. Stock options are outstanding under both the 2004 Plan and the
Companys 1993 Stock Option Plan, which expired in 2003.



A summary of option transactions for the nine-month period ended February 28, 2005, follows:



|                                 |  |                    |   |  |   |                             
|-------------------------------- |  | ------------------ | - |  | - | ----------------------------
|                                
|                                 |  | Shares UnderOption |   |  |   | Weighted-AverageOption Price
|                                
|                                 |  |                   
|Outstanding at May 31, 2004      |  | 3,102,268          |   |  | $ | 28.89                       
|Granted                          |  | 235,650            |   |  |   | 60.18                       
|Exercised                        |  | (1,483,438         | ) |  |   | 28.53                       
|Canceled                         |  | (51,890            | ) |  |   | 26.54                       
|                                 |  |                    |   |  |   |                             
|Outstanding at February 28, 2005 |  | 1,802,590          |   |  | $ | 33.34                       
|                                 |  |                    |   |  |   |                             





There were 772,320 shares exercisable at February 28, 2005. Outstanding options expire on various dates to January 11, 2015. The Company
has reserved 2,253,850 shares for future awards under the 2004 Plan.



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INCOME TAXES



Federal income taxes for the interim periods ended February
28, 2005 and February 29, 2004, have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion
that is tax deductible and state income tax expense. Applying these differences to the estimated current year pretax income resulted in an estimated annualized effective tax rate for 2005 of 32.4% compared to 26.2% for 2004. The tax benefit
attributed to cumulative effect of accounting change in 2004 is based on the incremental tax rate of 35%. The Company made income tax payments of $8.9 million and $1.3 million in the nine-month periods ended February 28, 2005 and February 29, 2004,
respectively.



The American Jobs Creation Act
of 2004, among other things, allows a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. The Company is currently evaluating the impact of the new law on its future taxable income. For
financial reporting purposes, any deductions for qualified domestic production activities will be accounted for as a special deduction rather than as a rate reduction.



LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES



The Company is subject to federal, state and local
environmental laws and regulations concerning, among other matters, air emissions, furnace dust disposal and wastewater discharge. The Company believes it is in substantial compliance with applicable environmental laws and regulations; however, from
time to time the Company receives claims from federal and state environmental regulatory agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience in dealing
with such claims in the past and the information currently available to it regarding any such claims that are currently unresolved, the Company believes that such claims will not have a material impact on its financial condition or results of
operations. Despite the Companys compliance and experience, it is possible that the Company could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state
laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the Company.



The Company and its subsidiaries are defendants in lawsuits which arose in the normal course of business. In managements judgment
(based on the opinion of counsel) the ultimate liability, if any, from such legal proceedings will not have a material effect on the consolidated financial position or results of operations of the Company.



RETIREMENT PLANS



Approximately 600 employees and retirees of Riverside Cement
Company are covered by a defined benefit pension plan and a postretirement health benefit plan. The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and expenses in the three-month and
nine-month periods ended February 28, 2005 and February 29, 2004, is as follows:



|                                   |  |   |                 |   |  |   |                |   |  |   |      |   |  |   |       |  
|---------------------------------- |  | - | --------------- | - |  | - | -------------- | - |  | - | ---- | - |  | - | ----- | -
|                                   | 
|                                   |  |   | Pension Benefit |   |  |   | Health Benefit |  
|In thousands                       |  |   | 2005            |   |  |   | 2004           |   |  |   | 2005 |   |  |   | 2004  |  
|                                   | 
|                                   |  |   |                 |  
|Three months ended February 28/29  |  |   |                 |   |  |   |                |   |  |   |      |   |  |   |       |  
|Service cost                       |  | $ | 109             |   |  | $ | 229            |   |  | $ | 23   |   |  | $ | 67    |  
|Interest cost                      |  |   | 644             |   |  |   | 590            |   |  |   | 123  |   |  |   | 192   |  
|Expected return on plan assets     |  |   | (611            | ) |  |   | (502           | ) |  |   | --   |   |  |   | --    |  
|Amortization of prior service cost |  |   | --              |   |  |   | --             |   |  |   | (211 | ) |  |   | (86   | )
|Amortization of net actuarial loss |  |   | 125             |   |  |   | 233            |   |  |   | 226  |   |  |   | 210   |  
|                                   |  |   |                 |   |  |   |                |   |  |   |      |   |  |   |       |  
|                                   |  | $ | 267             |   |  | $ | 550            |   |  | $ | 161  |   |  | $ | 383   |  
|                                   |  |   |                 |   |  |   |                |   |  |   |      |   |  |   |       |  
|                                   |  |   |                 |  
|Nine months ended February 28/29   |  |   |                 |   |  |   |                |   |  |   |      |   |  |   |       |  
|Service cost                       |  | $ | 327             |   |  | $ | 686            |   |  | $ | 69   |   |  | $ | 202   |  
|Interest cost                      |  |   | 1,932           |   |  |   | 1,772          |   |  |   | 369  |   |  |   | 575   |  
|Expected return on plan assets     |  |   | (1,832          | ) |  |   | (1,508         | ) |  |   | --   |   |  |   | --    |  
|Amortization of prior service cost |  |   | --              |   |  |   | --             |   |  |   | (633 | ) |  |   | (259  | )
|Amortization of net actuarial loss |  |   | 375             |   |  |   | 699            |   |  |   | 678  |   |  |   | 630   |  
|                                   |  |   |                 |   |  |   |                |   |  |   |      |   |  |   |       |  
|                                   |  | $ | 802             |   |  | $ | 1,649          |   |  | $ | 483  |   |  | $ | 1,148 |  
|                                   |  |   |                 |   |  |   |                |   |  |   |      |   |  |   |       |  



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The Company contributed $4.1 million to the defined benefit pension plan during the
nine-month period ended February 28, 2005. The Company does not expect to make any additional contributions during the remainder of the current fiscal year.



The U.S. Medicare Prescription Drug Improvement and Modernization Act of 2003 provides a new federal prescription drug benefit under
Medicare as well as a federal subsidy to sponsors of retiree health benefit plans that provide a benefit that meets certain criteria. The Companys postretirement health benefit plan currently provides certain prescription drug benefits to
eligible participants. Financial Accounting Standards Board Staff Position No. 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003 provides that an employer
shall measure the accumulated plan benefit obligation and net periodic postretirement benefit cost taking into account any subsidy received under the Act. The Company has concluded based on information provided by its actuaries that the enactment of
the Act was not a significant event, and therefore, the effect of the Act will be incorporated in the next measurement of the plan benefit obligation at May 31, 2005.



The Company has a series of financial security plans (FSP) that are non-qualified defined
benefit plans providing retirement and death benefits to substantially all of the Companys executive and key managerial employees. The plans are contributory but not funded.



The amount of FSP benefit expense charged to costs and expenses in the three-month and nine-month periods
ended February 28, 2005 and February 29, 2004, is as follows:



|                                  |  |   |             |   |  |   |       |  
|--------------------------------- |  | - | ----------- | - |  | - | ----- | -
|                                  | 
|                                  |  |   | FSP Benefit |  
|In thousands                      |  |   | 2005        |   |  |   | 2004  |  
|                                  | 
|                                  |  |  
|Three months ended February 28/29 |  |   |             |   |  |   |       |  
|Service cost                      |  | $ | 572         |   |  | $ | 515   |  
|Interest cost                     |  |   | 469         |   |  |   | 464   |  
|Amortization of transition amount |  |   | 45          |   |  |   | 47    |  
|Recognized actuarial gain         |  |   | --          |   |  |   | (14   | )
|Participant contributions         |  |   | (124        | ) |  |   | (137  | )
|                                  |  |   |             |   |  |   |       |  
|                                  |  | $ | 962         |   |  | $ | 875   |  
|                                  |  |   |             |   |  |   |       |  
|                                  |  |  
|Nine months ended February 28/29  |  |   |             |   |  |   |       |  
|Service cost                      |  | $ | 1,716       |   |  | $ | 1,545 |  
|Interest cost                     |  |   | 1,407       |   |  |   | 1,390 |  
|Amortization of transition amount |  |   | 135         |   |  |   | 141   |  
|Recognized actuarial gain         |  |   | --          |   |  |   | (42   | )
|Participant contributions         |  |   | (378        | ) |  |   | (387  | )
|                                  |  |   |             |   |  |   |       |  
|                                  |  | $ | 2,880       |   |  | $ | 2,647 |  
|                                  |  |   |             |   |  |   |       |  





BUSINESS SEGMENTS



The Company has two reportable segments: cement, aggregate and concrete products (the CAC segment) and steel (the
Steel segment). The Companys reportable segments are strategic business units that offer different products and services. They are managed separately because of significant differences in manufacturing processes, distribution and
markets served. Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, ready-mix concrete, expanded shale and clay aggregate, and other products. Through the Steel segment, the Company produces and sells structural
steel, piling products, special bar quality products, merchant bar quality rounds, reinforcing bar and channels. Operating profit is net sales less operating costs and expenses, excluding general corporate expenses and interest expense. Operating
results and certain other financial data for the Companys business segments are presented on pages 22 and 23 under Business Segments of Managements Discussion and Analysis of Financial Condition and Results of Operations, and
are incorporated herein by reference.



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CONDENSED CONSOLIDATING FINANCIAL INFORMATION



The Companys senior notes were issued by Texas
Industries, Inc. (the parent company), which has no independent assets or operations, excluding amounts related to its investments in its subsidiaries and financing activities. All consolidated subsidiaries of the Company are 100% owned and,
excluding the Companys former accounts receivable subsidiary and other minor subsidiaries without operations or material assets, provided a joint and several, full and unconditional guarantee of the securities. There are no significant
restrictions on the parent companys ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on the various guarantor subsidiaries ability to
obtain funds from its direct or indirect subsidiaries.



The Companys accounts receivable subsidiary was established in March 1999 to facilitate the Companys agreement to sell, on a revolving basis, an undivided interest in a defined pool of trade receivables. At May 31, 2003, the
subsidiary had total assets of $54.1 million. However, on June 6, 2003, in connection with the issuance of the senior notes, the Company repurchased the entire outstanding interest in the defined pool of trade receivables previously sold and
terminated the agreement to sell trade receivables. The repurchased trade receivables were subsequently transferred to the respective operating entities. Effective May 27, 2004, the subsidiary was merged into the parent company. The following
condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the parent company, all guarantor subsidiaries and all non-guarantor subsidiaries. The information has been presented as if the parent
company accounted for its ownership of the guarantor and non-guarantor subsidiaries using the equity method of accounting.





|                                                           |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|---------------------------------------------------------- |  | - | -------------------- |  | - | --------------------- |  | - | ------------------------- |  | - | ------------------ | - |  | - | ------------
|                                                          
|In thousands                                               |  |   | TexasIndustries,Inc. |  |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |  |   | EliminatingEntries |   |  |   | Consolidated
|                                                          
|                                                          
|Condensed consolidating balance sheet at February 28, 2005
|                                                           |  |   |                      |  |  
|Cash and cash equivalents                                  |  | $ | 159,040              |  | $ | 5,611                 |  | $ | --                        |  | $ | --                 |   |  | $ | 164,651     
|Accounts receivable - net                                  |  |   | --                   |  |   | 214,844               |  |   | --                        |  |   | --                 |   |  |   | 214,844     
|Intercompany receivables                                   |  |   | 315,505              |  |   | 591,046               |  |   | --                        |  |   | (906,551           | ) |  |   | --          
|Inventories                                                |  |   | --                   |  |   | 332,525               |  |   | --                        |  |   | --                 |   |  |   | 332,525     
|Deferred taxes and prepaid expenses                        |  |   | 3,601                |  |   | 39,465                |  |   | --                        |  |   | --                 |   |  |   | 43,066      
|                                                           |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total current assets                                       |  |   | 478,146              |  |   | 1,183,491             |  |   | --                        |  |   | (906,551           | ) |  |   | 755,086     
|                                                           |  |   |                      |  |  
|Goodwill                                                   |  |   | --                   |  |   | 146,474               |  |   | --                        |  |   | --                 |   |  |   | 146,474     
|Real estate and investments                                |  |   | --                   |  |   | 107,926               |  |   | --                        |  |   | --                 |   |  |   | 107,926     
|Deferred charges and intangibles                           |  |   | 17,860               |  |   | 10,426                |  |   | --                        |  |   | --                 |   |  |   | 28,286      
|Deferred income taxes                                      |  |   | 34,611               |  |   | --                    |  |   | --                        |  |   | (34,611            | ) |  |   | --          
|Investment in subsidiaries                                 |  |   | 1,178,536            |  |   | --                    |  |   | --                        |  |   | (1,178,536         | ) |  |   | --          
|Long-term intercompany receivables                         |  |   | 593,246              |  |   | --                    |  |   | --                        |  |   | (593,246           | ) |  |   | --          
|Property, plant and equipment - net                        |  |   | --                   |  |   | 1,040,594             |  |   | --                        |  |   | (508               | ) |  |   | 1,040,086   
|                                                           |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total assets                                               |  | $ | 2,302,399            |  | $ | 2,488,911             |  | $ | --                        |  | $ | (2,713,452         | ) |  | $ | 2,077,858   
|                                                           |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|                                                           |  |   |                      |  |  
|Accounts payable                                           |  | $ | 228                  |  | $ | 115,930               |  | $ | --                        |  | $ | --                 |   |  | $ | 116,158     
|Intercompany payables                                      |  |   | 591,046              |  |   | 315,505               |  |   | --                        |  |   | (906,551           | ) |  |   | --          
|Accrued interest, wages and other items                    |  |   | 15,888               |  |   | 45,322                |  |   | --                        |  |   | --                 |   |  |   | 61,210      
|Current portion of long-term debt                          |  |   | 680                  |  |   | 7                     |  |   | --                        |  |   | --                 |   |  |   | 687         
|                                                           |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total current liabilities                                  |  |   | 607,842              |  |   | 476,764               |  |   | --                        |  |   | (906,551           | ) |  |   | 178,055     
|                                                           |  |   |                      |  |  
|Long-term debt                                             |  |   | 603,125              |  |   | 382                   |  |   | --                        |  |   | --                 |   |  |   | 603,507     
|Convertible subordinated debentures                        |  |   | 199,937              |  |   | --                    |  |   | --                        |  |   | --                 |   |  |   | 199,937     
|Long-term intercompany payables                            |  |   | --                   |  |   | 593,246               |  |   | --                        |  |   | (593,246           | ) |  |   | --          
|Deferred income taxes and other credits                    |  |   | 2,511                |  |   | 239,629               |  |   | --                        |  |   | (34,765            | ) |  |   | 207,375     
|Shareholders equity                                       |  |   | 888,984              |  |   | 1,178,890             |  |   | --                        |  |   | (1,178,890         | ) |  |   | 888,984     
|                                                           |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total liabilities and shareholders equity                 |  | $ | 2,302,399            |  | $ | 2,488,911             |  | $ | --                        |  | $ | (2,713,452         | ) |  | $ | 2,077,858   
|                                                           |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             



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|                                                      |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|----------------------------------------------------- |  | - | -------------------- |  | - | --------------------- |  | - | ------------------------- |  | - | ------------------ | - |  | - | ------------
|                                                     
|In thousands                                          |  |   | TexasIndustries,Inc. |  |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |  |   | EliminatingEntries |   |  |   | Consolidated
|                                                     
|                                                     
|Condensed consolidating balance sheet at May 31, 2004
|                                                      |  |   |                      |  |  
|Cash and cash equivalents                             |  | $ | 134,813              |  | $ | 6,815                 |  | $ | --                        |  | $ | --                 |   |  | $ | 141,628     
|Accounts receivable - net                             |  |   | --                   |  |   | 211,535               |  |   | --                        |  |   | --                 |   |  |   | 211,535     
|Intercompany receivables                              |  |   | 172,560              |  |   | 429,398               |  |   | --                        |  |   | (601,958           | ) |  |   | --          
|Inventories                                           |  |   | --                   |  |   | 266,533               |  |   | --                        |  |   | --                 |   |  |   | 266,533     
|Deferred taxes and prepaid expenses                   |  |   | 37                   |  |   | 34,917                |  |   | --                        |  |   | --                 |   |  |   | 34,954      
|                                                      |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total current assets                                  |  |   | 307,410              |  |   | 949,198               |  |   | --                        |  |   | (601,958           | ) |  |   | 654,650     
|                                                      |  |   |                      |  |  
|Goodwill                                              |  |   | --                   |  |   | 146,474               |  |   | --                        |  |   | --                 |   |  |   | 146,474     
|Real estate and investments                           |  |   | --                   |  |   | 47,006                |  |   | --                        |  |   | --                 |   |  |   | 47,006      
|Deferred charges and intangibles                      |  |   | 21,687               |  |   | 10,667                |  |   | --                        |  |   | --                 |   |  |   | 32,354      
|Deferred income taxes                                 |  |   | 32,053               |  |   | --                    |  |   | --                        |  |   | (32,053            | ) |  |   | --          
|Investment in subsidiaries                            |  |   | 1,078,895            |  |   | --                    |  |   | --                        |  |   | (1,078,895         | ) |  |   | --          
|Long-term intercompany receivables                    |  |   | 593,246              |  |   | --                    |  |   | --                        |  |   | (593,246           | ) |  |   | --          
|Property, plant and equipment - net                   |  |   | --                   |  |   | 1,064,157             |  |   | --                        |  |   | (508               | ) |  |   | 1,063,649   
|                                                      |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total assets                                          |  | $ | 2,033,291            |  | $ | 2,217,502             |  | $ | --                        |  | $ | (2,306,660         | ) |  | $ | 1,944,133   
|                                                      |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|                                                      |  |   |                      |  |  
|Accounts payable                                      |  | $ | 35                   |  | $ | 108,522               |  | $ | --                        |  | $ | --                 |   |  | $ | 108,557     
|Intercompany payables                                 |  |   | 429,398              |  |   | 172,560               |  |   | --                        |  |   | (601,958           | ) |  |   | --          
|Accrued interest, wages and other items               |  |   | 29,088               |  |   | 49,611                |  |   | --                        |  |   | --                 |   |  |   | 78,699      
|Current portion of long-term debt                     |  |   | 680                  |  |   | 19                    |  |   | --                        |  |   | --                 |   |  |   | 699         
|                                                      |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total current liabilities                             |  |   | 459,201              |  |   | 330,712               |  |   | --                        |  |   | (601,958           | ) |  |   | 187,955     
|                                                      |  |   |                      |  |  
|Long-term debt                                        |  |   | 598,027              |  |   | 385                   |  |   | --                        |  |   | --                 |   |  |   | 598,412     
|Convertible subordinated debentures                   |  |   | 199,937              |  |   | --                    |  |   | --                        |  |   | --                 |   |  |   | 199,937     
|Long-term intercompany payables                       |  |   | --                   |  |   | 593,246               |  |   | --                        |  |   | (593,246           | ) |  |   | --          
|Deferred income taxes and other credits               |  |   | 14,142               |  |   | 213,910               |  |   | --                        |  |   | (32,207            | ) |  |   | 195,845     
|Shareholders equity                                  |  |   | 761,984              |  |   | 1,079,249             |  |   | --                        |  |   | (1,079,249         | ) |  |   | 761,984     
|                                                      |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             
|Total liabilities and shareholders equity            |  | $ | 2,033,291            |  | $ | 2,217,502             |  | $ | --                        |  | $ | (2,306,660         | ) |  | $ | 1,944,133   
|                                                      |  |   |                      |  |   |                       |  |   |                           |  |   |                    |   |  |   |             



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|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|---------------------------------------------------------------------------------------- |  | - | -------------------- | - |  | - | --------------------- | - |  | - | ------------------------- |  | - | ------------------ | - |  | - | ------------ | -
|                                                                                         | 
|In thousands                                                                             |  |   | TexasIndustries,Inc. |   |  |   | GuarantorSubsidiaries |   |  |   | Non-GuarantorSubsidiaries |  |   | EliminatingEntries |   |  |   | Consolidated |  
|                                                                                         | 
|                                                                                         | 
|Condensed consolidating statement of operations for three months ended February 28, 2005 |  |   |                      |   | 
|                                                                                         |  |   |                      |   | 
|Net sales                                                                                |  | $ | --                   |   |  | $ | 440,158               |   |  | $ | --                        |  | $ | --                 |   |  | $ | 440,158      |  
|Costs and expenses (income)                                                              |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|Cost of products sold                                                                    |  |   | --                   |   |  |   | 384,044               |   |  |   | --                        |  |   | --                 |   |  |   | 384,044      |  
|Selling, general and administrative                                                      |  |   | 1,314                |   |  |   | 23,223                |   |  |   | --                        |  |   | --                 |   |  |   | 24,537       |  
|Interest                                                                                 |  |   | 17,797               |   |  |   | 13,106                |   |  |   | --                        |  |   | (13,058            | ) |  |   | 17,845       |  
|Loss on early retirement of debt                                                         |  |   | --                   |   |  |   | --                    |   |  |   | --                        |  |   | --                 |   |  |   | --           |  
|Other income                                                                             |  |   | (14,005              | ) |  |   | (7,983                | ) |  |   | --                        |  |   | 13,058             |   |  |   | (8,930       | )
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|                                                                                         |  |   | 5,106                |   |  |   | 412,390               |   |  |   | --                        |  |   | --                 |   |  |   | 417,496      |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|Income (loss) before the following items                                                 |  |   | (5,106               | ) |  |   | 27,768                |   |  |   | --                        |  |   | --                 |   |  |   | 22,662       |  
|Income taxes (benefit)                                                                   |  |   | (1,787               | ) |  |   | 8,459                 |   |  |   | --                        |  |   | --                 |   |  |   | 6,672        |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|                                                                                         |  |   | (3,319               | ) |  |   | 19,309                |   |  |   | --                        |  |   | --                 |   |  |   | 15,990       |  
|Accounting change - net of income taxes                                                  |  |   | --                   |   |  |   | --                    |   |  |   | --                        |  |   | --                 |   |  |   | --           |  
|Equity in earnings (loss) of subsidiaries                                                |  |   | 19,309               |   |  |   | --                    |   |  |   | --                        |  |   | (19,309            | ) |  |   | --           |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|Net income (loss)                                                                        |  | $ | 15,990               |   |  | $ | 19,309                |   |  | $ | --                        |  | $ | (19,309            | ) |  | $ | 15,990       |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|                                                                                         | 
|Condensed consolidating statement of operations for three months ended February 29, 2004 |  |   |                      |   | 
|                                                                                         |  |   |                      |   | 
|Net sales                                                                                |  | $ | --                   |   |  | $ | 407,970               |   |  | $ | --                        |  | $ | --                 |   |  | $ | 407,970      |  
|Costs and expenses (income)                                                              |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|Cost of products sold                                                                    |  |   | --                   |   |  |   | 368,746               |   |  |   | --                        |  |   | --                 |   |  |   | 368,746      |  
|Selling, general and administrative                                                      |  |   | 982                  |   |  |   | 21,895                |   |  |   | --                        |  |   | --                 |   |  |   | 22,877       |  
|Interest                                                                                 |  |   | 17,136               |   |  |   | 14,222                |   |  |   | --                        |  |   | (13,397            | ) |  |   | 17,961       |  
|Loss on early retirement of debt                                                         |  |   | --                   |   |  |   | --                    |   |  |   | --                        |  |   | --                 |   |  |   | --           |  
|Other income                                                                             |  |   | (47,851              | ) |  |   | (2,147                | ) |  |   | --                        |  |   | 13,397             |   |  |   | (36,601      | )
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|                                                                                         |  |   | (29,733              | ) |  |   | 402,716               |   |  |   | --                        |  |   | --                 |   |  |   | 372,983      |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|Income (loss) before the following items                                                 |  |   | 29,733               |   |  |   | 5,254                 |   |  |   | --                        |  |   | --                 |   |  |   | 34,987       |  
|Income taxes (benefit)                                                                   |  |   | 10,407               |   |  |   | 3,691                 |   |  |   | --                        |  |   | --                 |   |  |   | 14,098       |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|                                                                                         |  |   | 19,326               |   |  |   | 1,563                 |   |  |   | --                        |  |   | --                 |   |  |   | 20,889       |  
|Accounting change - net of income taxes                                                  |  |   | --                   |   |  |   | --                    |   |  |   | --                        |  |   | --                 |   |  |   | --           |  
|Equity in earnings (loss) of subsidiaries                                                |  |   | 1,563                |   |  |   | --                    |   |  |   | --                        |  |   | (1,563             | ) |  |   | --           |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  
|Net income (loss)                                                                        |  | $ | 20,889               |   |  | $ | 1,563                 |   |  | $ | --                        |  | $ | (1,563             | ) |  | $ | 20,889       |  
|                                                                                         |  |   |                      |   |  |   |                       |   |  |   |                           |  |   |                    |   |  |   |              |  





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##### Table of Contents

|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|--------------------------------------------------------------------------------------- |  | - | -------------------- | - |  | - | --------------------- | - |  | - | ------------------------- | - |  | - | ------------------ | - |  | - | ------------ | -
|                                                                                        | 
|In thousands                                                                            |  |   | TexasIndustries,Inc. |   |  |   | GuarantorSubsidiaries |   |  |   | Non-GuarantorSubsidiaries |   |  |   | EliminatingEntries |   |  |   | Consolidated |  
|                                                                                        | 
|                                                                                        | 
|Condensed consolidating statement of operations for nine months ended February 28, 2005 |  |   |                      |   | 
|                                                                                        |  |   |                      |   | 
|Net sales                                                                               |  | $ | --                   |   |  | $ | 1,383,729             |   |  | $ | --                        |   |  | $ | --                 |   |  | $ | 1,383,729    |  
|Costs and expenses (income)                                                             |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|Cost of products sold                                                                   |  |   | --                   |   |  |   | 1,156,099             |   |  |   | --                        |   |  |   | --                 |   |  |   | 1,156,099    |  
|Selling, general and administrative                                                     |  |   | 2,465                |   |  |   | 74,848                |   |  |   | --                        |   |  |   | --                 |   |  |   | 77,313       |  
|Interest                                                                                |  |   | 51,738               |   |  |   | 38,902                |   |  |   | --                        |   |  |   | (38,717            | ) |  |   | 51,923       |  
|Loss on early retirement of debt                                                        |  |   | --                   |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |   |  |   | --           |  
|Other income                                                                            |  |   | (40,648              | ) |  |   | (22,290               | ) |  |   | --                        |   |  |   | 38,717             |   |  |   | (24,221      | )
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|                                                                                        |  |   | 13,555               |   |  |   | 1,247,559             |   |  |   | --                        |   |  |   | --                 |   |  |   | 1,261,114    |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|Income (loss) before the following items                                                |  |   | (13,555              | ) |  |   | 136,170               |   |  |   | --                        |   |  |   | --                 |   |  |   | 122,615      |  
|Income taxes (benefit)                                                                  |  |   | (4,744               | ) |  |   | 44,529                |   |  |   | --                        |   |  |   | --                 |   |  |   | 39,785       |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|                                                                                        |  |   | (8,811               | ) |  |   | 91,641                |   |  |   | --                        |   |  |   | --                 |   |  |   | 82,830       |  
|Accounting change - net of income taxes                                                 |  |   | --                   |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |   |  |   | --           |  
|Equity in earnings (loss) of subsidiaries                                               |  |   | 91,641               |   |  |   | --                    |   |  |   | --                        |   |  |   | (91,641            | ) |  |   | --           |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|Net income (loss)                                                                       |  | $ | 82,830               |   |  | $ | 91,641                |   |  | $ | --                        |   |  | $ | (91,641            | ) |  | $ | 82,830       |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|                                                                                        | 
|Condensed consolidating statement of operations for nine months ended February 29, 2004 |  |   |                      |   | 
|                                                                                        |  |   |                      |   | 
|Net sales                                                                               |  | $ | --                   |   |  | $ | 1,152,567             |   |  | $ | --                        |   |  | $ | --                 |   |  | $ | 1,152,567    |  
|Costs and expenses (income)                                                             |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|Cost of products sold                                                                   |  |   | --                   |   |  |   | 1,055,250             |   |  |   | --                        |   |  |   | --                 |   |  |   | 1,055,250    |  
|Selling, general and administrative                                                     |  |   | 2,880                |   |  |   | 70,236                |   |  |   | 36                        |   |  |   | --                 |   |  |   | 73,152       |  
|Interest                                                                                |  |   | 53,505               |   |  |   | 42,331                |   |  |   | 31                        |   |  |   | (39,983            | ) |  |   | 55,884       |  
|Loss on early retirement of debt                                                        |  |   | 11,246               |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |   |  |   | 11,246       |  
|Other income                                                                            |  |   | (74,503              | ) |  |   | (8,492                | ) |  |   | (67                       | ) |  |   | 40,175             |   |  |   | (42,887      | )
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|                                                                                        |  |   | (6,872               | ) |  |   | 1,159,325             |   |  |   | --                        |   |  |   | 192                |   |  |   | 1,152,645    |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|Income (loss) before the following items                                                |  |   | 6,872                |   |  |   | (6,758                | ) |  |   | --                        |   |  |   | (192               | ) |  |   | (78          | )
|Income taxes (benefit)                                                                  |  |   | 2,405                |   |  |   | (2,214                | ) |  |   | --                        |   |  |   | (67                | ) |  |   | 124          |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|                                                                                        |  |   | 4,467                |   |  |   | (4,544                | ) |  |   | --                        |   |  |   | (125               | ) |  |   | (202         | )
|Accounting change - net of income taxes                                                 |  |   | --                   |   |  |   | (1,071                | ) |  |   | --                        |   |  |   | --                 |   |  |   | (1,071       | )
|Equity in earnings (loss) of subsidiaries                                               |  |   | (5,740               | ) |  |   | --                    |   |  |   | --                        |   |  |   | 5,740              |   |  |   | --           |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  
|Net income (loss)                                                                       |  | $ | (1,273               | ) |  | $ | (5,615                | ) |  | $ | --                        |   |  | $ | 5,615              |   |  | $ | (1,273       | )
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |   |  |   |              |  



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##### Table of Contents

|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|--------------------------------------------------------------------------------------- |  | - | -------------------- | - |  | - | --------------------- | - |  | - | ------------------------- | - |  | - | ------------------ |  | - | ------------ | -
|                                                                                        | 
|In thousands                                                                            |  |   | TexasIndustries,Inc. |   |  |   | GuarantorSubsidiaries |   |  |   | Non-GuarantorSubsidiaries |   |  |   | EliminatingEntries |  |   | Consolidated |  
|                                                                                        | 
|                                                                                        | 
|Condensed consolidating statement of cash flows for nine months ended February 28, 2005 |  |   |                      |  
|                                                                                        |  |   |                      |   | 
|Net cash provided (used) by operations                                                  |  | $ | (3,244               | ) |  | $ | 100,737               |   |  | $ | --                        |   |  | $ | --                 |  | $ | 97,493       |  
|                                                                                        |  |   |                      |   | 
|Investing activities                                                                    |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Capital expenditures                                                                    |  |   | --                   |   |  |   | (48,792               | ) |  |   | --                        |   |  |   | --                 |  |   | (48,792      | )
|Proceeds from disposal of assets                                                        |  |   | --                   |   |  |   | 6,621                 |   |  |   | --                        |   |  |   | --                 |  |   | 6,621        |  
|Investments in life insurance contracts                                                 |  |   | --                   |   |  |   | (59,094               | ) |  |   | --                        |   |  |   | --                 |  |   | (59,094      | )
|Other - net                                                                             |  |   | (500                 | ) |  |   | (659                  | ) |  |   | --                        |   |  |   | --                 |  |   | (1,159       | )
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Net cash used by investing                                                              |  |   | (500                 | ) |  |   | (101,924              | ) |  |   | --                        |   |  |   | --                 |  |   | (102,424     | )
|                                                                                        |  |   |                      |   | 
|Financing activities                                                                    |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Long-term borrowings                                                                    |  |   | --                   |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | --           |  
|Debt retirements                                                                        |  |   | (340                 | ) |  |   | (17                   | ) |  |   | --                        |   |  |   | --                 |  |   | (357         | )
|Debt issuance costs                                                                     |  |   | --                   |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | --           |  
|Debt retirement costs                                                                   |  |   | --                   |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | --           |  
|Interest rate swap termination costs                                                    |  |   | (6,315               | ) |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | (6,315       | )
|Proceeds from stock option exercises                                                    |  |   | 39,565               |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | 39,565       |  
|Common dividends paid                                                                   |  |   | (4,939               | ) |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | (4,939       | )
|Other - net                                                                             |  |   | --                   |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | --           |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Net cash provided (used) by financing                                                   |  |   | 27,971               |   |  |   | (17                   | ) |  |   | --                        |   |  |   | --                 |  |   | 27,954       |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Increase (decrease) in cash and cash equivalents                                        |  |   | 24,227               |   |  |   | (1,204                | ) |  |   | --                        |   |  |   | --                 |  |   | 23,023       |  
|Cash and cash equivalents at beginning of period                                        |  |   | 134,813              |   |  |   | 6,815                 |   |  |   | --                        |   |  |   | --                 |  |   | 141,628      |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Cash and cash equivalents at end of period                                              |  | $ | 159,040              |   |  | $ | 5,611                 |   |  | $ | --                        |   |  | $ | --                 |  | $ | 164,651      |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|                                                                                        | 
|Condensed consolidating statement of cash flows for nine months ended February 29, 2004 |  |   |                      |  
|                                                                                        |  |   |                      |   | 
|Net cash provided (used) by operations                                                  |  | $ | (77,431              | ) |  | $ | 16,457                |   |  | $ | (5                        | ) |  | $ | --                 |  | $ | (60,979      | )
|                                                                                        |  |   |                      |   | 
|Investing activities                                                                    |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Capital expenditures                                                                    |  |   | --                   |   |  |   | (24,725               | ) |  |   | --                        |   |  |   | --                 |  |   | (24,725      | )
|Proceeds from disposal of assets                                                        |  |   | 37,566               |   |  |   | 2,499                 |   |  |   | --                        |   |  |   | --                 |  |   | 40,065       |  
|Investments in life insurance contracts                                                 |  |   | --                   |   |  |   | 213                   |   |  |   | --                        |   |  |   | --                 |  |   | 213          |  
|Other - net                                                                             |  |   | --                   |   |  |   | (1,788                | ) |  |   | --                        |   |  |   | --                 |  |   | (1,788       | )
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Net cash used by investing                                                              |  |   | 37,566               |   |  |   | (23,801               | ) |  |   | --                        |   |  |   | --                 |  |   | 13,765       |  
|                                                                                        |  |   |                      |   | 
|Financing activities                                                                    |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Long-term borrowings                                                                    |  |   | 718,097              |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | 718,097      |  
|Debt retirements                                                                        |  |   | (591,937             | ) |  |   | (115                  | ) |  |   | --                        |   |  |   | --                 |  |   | (592,052     | )
|Debt issuance costs                                                                     |  |   | (16,373              | ) |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | (16,373      | )
|Debt retirement costs                                                                   |  |   | (8,505               | ) |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | (8,505       | )
|Interest rate swap termination costs                                                    |  |   | --                   |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | --           |  
|Proceeds from stock option exercises                                                    |  |   | 1,678                |   |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | 1,678        |  
|Common dividends paid                                                                   |  |   | (4,748               | ) |  |   | --                    |   |  |   | --                        |   |  |   | --                 |  |   | (4,748       | )
|Other - net                                                                             |  |   | (259                 | ) |  |   | (26                   | ) |  |   | --                        |   |  |   | --                 |  |   | (285         | )
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Net cash provided (used) by financing                                                   |  |   | 97,953               |   |  |   | (141                  | ) |  |   | --                        |   |  |   | --                 |  |   | 97,812       |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Increase (decrease) in cash and cash equivalents                                        |  |   | 58,088               |   |  |   | (7,485                | ) |  |   | (5                        | ) |  |   | --                 |  |   | 50,598       |  
|Cash and cash equivalents at beginning of period                                        |  |   | 4,161                |   |  |   | 2,038                 |   |  |   | 5                         |   |  |   | --                 |  |   | 6,204        |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  
|Cash and cash equivalents at end of period                                              |  | $ | 62,249               |   |  | $ | (5,447                | ) |  | $ | --                        |   |  | $ | --                 |  | $ | 56,802       |  
|                                                                                        |  |   |                      |   |  |   |                       |   |  |   |                           |   |  |   |                    |  |   |              |  



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##### Table of Contents

EXHIBIT A



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM









Board of Directors

Texas Industries, Inc.



We have reviewed the accompanying condensed consolidated balance sheet of
Texas Industries, Inc. and subsidiaries (the Company) as of February 28, 2005, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended February 28, 2005 and February 29, 2004, and the
condensed consolidated statements of cash flows for the nine-month periods ended February 28, 2005 and February 29, 2004. These financial statements are the responsibility of the Companys management.



We conducted our review in accordance with the standards of the Public
Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.



Based on our
review, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.



We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2004, and the related consolidated statements of operations, shareholders equity, and cash flows for
the year then ended [not presented herein], and in our report dated June 30, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of May 31, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.







/s/  Ernst & Young LLP






April 5, 2005



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MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Comparison of operations and financial condition for the
three-month and nine-month periods ended February 28, 2005 to the three-month and nine-month periods ended February 29, 2004.



BUSINESS SEGMENTS



The Company is a leading supplier of construction materials through two business segments: cement, aggregate and concrete products (the
CAC segment); and structural steel and steel bar products (the Steel segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, ready-mix concrete, expanded shale and clay aggregate, and
other products. Through the Steel segment, the Company produces and sells structural steel, piling products, special bar quality products, merchant bar quality rounds, reinforcing bar and channels.



Corporate resources include administration, financial, legal,
environmental, human resources and real estate activities which are not allocated to operations and are excluded from operating profit.





|                            |  |   |                    |  |   |                   |  |   |              |  |   |             
|--------------------------- |  | - | ------------------ |  | - | ----------------- |  | - | ------------ |  | - | ------------
|                            |  |   | Three months ended |  |   | Nine months ended
|                            |  |   | February 28,       |  |   | February 29,      |  |   | February 28, |  |   | February 29,
|                           
|In thousands                |  |   | 2005               |  |   | 2004              |  |   | 2005         |  |   | 2004        
|                           
|                            |  |   |                    | 
|TOTAL SALES                 |  |   |                    |  |   |                   |  |   |              |  |   |             
|Cement                      |  | $ | 84,935             |  | $ | 80,019            |  | $ | 285,171      |  | $ | 260,442     
|Ready-mix                   |  |   | 47,750             |  |   | 43,231            |  |   | 157,494      |  |   | 150,884     
|Stone, sand & gravel        |  |   | 30,223             |  |   | 23,990            |  |   | 93,343       |  |   | 87,079      
|Structural mills            |  |   | 182,237            |  |   | 169,758           |  |   | 564,551      |  |   | 418,673     
|Bar mill                    |  |   | 56,876             |  |   | 49,757            |  |   | 173,317      |  |   | 119,455     
|                            |  |   |                    | 
|UNITS SHIPPED               |  |   |                    |  |   |                   |  |   |              |  |   |             
|Cement (tons)               |  |   | 1,133              |  |   | 1,179             |  |   | 3,881        |  |   | 3,834       
|Ready-mix (cubic yards)     |  |   | 782                |  |   | 734               |  |   | 2,650        |  |   | 2,597       
|Stone, sand & gravel (tons) |  |   | 5,392              |  |   | 4,490             |  |   | 16,687       |  |   | 16,140      
|Structural mills (tons)     |  |   | 318                |  |   | 438               |  |   | 1,013        |  |   | 1,195       
|Bar mill (tons)             |  |   | 83                 |  |   | 132               |  |   | 270          |  |   | 337         
|                            |  |   |                    | 
|NET SALES                   |  |   |                    |  |   |                   |  |   |              |  |   |             
|Cement                      |  | $ | 71,312             |  | $ | 67,973            |  | $ | 240,179      |  | $ | 218,745     
|Ready-mix                   |  |   | 47,680             |  |   | 43,210            |  |   | 157,310      |  |   | 150,639     
|Stone, sand & gravel        |  |   | 22,638             |  |   | 17,541            |  |   | 68,542       |  |   | 63,948      
|Other products              |  |   | 22,095             |  |   | 24,900            |  |   | 67,794       |  |   | 79,246      
|Delivery fees               |  |   | 17,314             |  |   | 12,656            |  |   | 50,885       |  |   | 42,482      
|                            |  |   |                    |  |   |                   |  |   |              |  |   |             
|TOTAL CAC                   |  |   | 181,039            |  |   | 166,280           |  |   | 584,710      |  |   | 555,060     
|                            |  |   |                    | 
|Structural mills            |  |   | 182,237            |  |   | 169,758           |  |   | 564,551      |  |   | 418,673     
|Bar mill                    |  |   | 56,876             |  |   | 49,757            |  |   | 173,317      |  |   | 119,455     
|Other products              |  |   | 7,823              |  |   | 7,094             |  |   | 22,992       |  |   | 18,058      
|Delivery fees               |  |   | 12,183             |  |   | 15,081            |  |   | 38,159       |  |   | 41,321      
|                            |  |   |                    |  |   |                   |  |   |              |  |   |             
|TOTAL STEEL                 |  |   | 259,119            |  |   | 241,690           |  |   | 799,019      |  |   | 597,507     
|                            |  |   |                    |  |   |                   |  |   |              |  |   |             
|TOTAL NET SALES             |  | $ | 440,158            |  | $ | 407,970           |  | $ | 1,383,729    |  | $ | 1,152,567   
|                            |  |   |                    |  |   |                   |  |   |              |  |   |             



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|                                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|------------------------------------------------------ |  | - | ------------------ | - |  | - | ----------------- | - |  | - | ------------ | - |  | - | ------------ | -
|                                                       |  |   | Three months ended |   |  |   | Nine months ended |  
|                                                       |  |   | February 28,       |   |  |   | February 29,      |   |  |   | February 28, |   |  |   | February 29, |  
|                                                       | 
|In thousands                                           |  |   | 2005               |   |  |   | 2004              |   |  |   | 2005         |   |  |   | 2004         |  
|                                                       | 
|                                                       |  |   |                    |  
|CAC OPERATIONS                                         |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Gross profit                                           |  | $ | 27,861             |   |  | $ | 34,009            |   |  | $ | 109,553      |   |  | $ | 121,592      |  
|Less:   Depreciation, depletion & amortization         |  |   | 11,244             |   |  |   | 11,333            |   |  |   | 33,398       |   |  |   | 34,245       |  
|Selling, general & administrative                      |  |   | 9,162              |   |  |   | 9,506             |   |  |   | 33,623       |   |  |   | 32,238       |  
|Other income                                           |  |   | (5,979             | ) |  |   | (34,716           | ) |  |   | (15,527      | ) |  |   | (36,684      | )
|                                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|OPERATING PROFIT                                       |  |   | 13,434             |   |  |   | 47,886            |   |  |   | 58,059       |   |  |   | 91,793       |  
|                                                       |  |   |                    |  
|STEEL OPERATIONS                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Gross profit                                           |  |   | 51,548             |   |  |   | 28,620            |   |  |   | 187,441      |   |  |   | 46,544       |  
|Less:   Depreciation & amortization                    |  |   | 12,234             |   |  |   | 12,287            |   |  |   | 36,515       |   |  |   | 37,234       |  
|Selling, general & administrative                      |  |   | 6,417              |   |  |   | 5,623             |   |  |   | 18,949       |   |  |   | 18,661       |  
|Other income                                           |  |   | (1,923             | ) |  |   | (884              | ) |  |   | (3,745       | ) |  |   | (5,025       | )
|                                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|OPERATING PROFIT (LOSS)                                |  |   | 34,820             |   |  |   | 11,594            |   |  |   | 135,722      |   |  |   | (4,326       | )
|                                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|TOTAL OPERATING PROFIT                                 |  |   | 48,254             |   |  |   | 59,480            |   |  |   | 193,781      |   |  |   | 87,467       |  
|                                                       |  |   |                    |  
|CORPORATE RESOURCES                                    |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|Other income                                           |  |   | 1,028              |   |  |   | 1,001             |   |  |   | 4,949        |   |  |   | 1,178        |  
|Less:   Depreciation & amortization                    |  |   | 433                |   |  |   | 468               |   |  |   | 1,331        |   |  |   | 1,418        |  
|Selling, general & administrative                      |  |   | 8,342              |   |  |   | 7,065             |   |  |   | 22,861       |   |  |   | 20,175       |  
|                                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                       |  |   | (7,747             | ) |  |   | (6,532            | ) |  |   | (19,243      | ) |  |   | (20,415      | )
|                                                       |  |   |                    |  
|INTEREST EXPENSE                                       |  |   | (17,845            | ) |  |   | (17,961           | ) |  |   | (51,923      | ) |  |   | (55,884      | )
|                                                       |  |   |                    |  
|LOSS ON EARLY RETIREMENT OF DEBT                       |  |   | --                 |   |  |   | --                |   |  |   | --           |   |  |   | (11,246      | )
|                                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  
|                                                       |  |   |                    |  
|INCOME (LOSS) BEFORE INCOMETAXES AND ACCOUNTING CHANGE |  | $ | 22,662             |   |  | $ | 34,987            |   |  | $ | 122,615      |   |  | $ | (78          | )
|                                                       |  |   |                    |   |  |   |                   |   |  |   |              |   |  |   |              |  





RESULTS OF OPERATIONS





CAC Operations



CAC operating profit at $13.4 million in the current quarter
and $58.1 million in the current nine-month period decreased from the prior year periods $34.5 million and $33.7 million, respectively. Operating profit in the prior year periods included $34.4 million of other income from the February 2004 sale of
the Companys brick production facilities in Texas and Louisiana. The impact of abnormally wet weather in the Companys Texas and California markets and cement plant downtime reduced cement shipments and increased cement unit costs in the
current quarter, offsetting the effect of higher realized prices for the Companys major products. Overall demand remains solid in the Companys Texas and California markets.



Net Sales. CAC sales at $181.0 million in the current quarter increased $14.8 million from the prior
year period. Total cement sales increased $4.9 million on 11% higher average trade prices and 4% lower shipments. Ready-mix sales increased $4.5 million on 4% higher average trade prices and 7% higher volume. Aggregate sales increased $6.2 million
on 3% higher average trade prices and 20% higher shipments.



CAC sales at $584.7 million in the current nine-month period increased $29.7 million from the prior year period. Total cement sales increased $24.7 million on 8% higher average trade prices and comparable shipments.
Ready-mix sales increased $6.6 million on 2% higher average trade prices and 2% higher volume. Aggregate sales increased $6.3 million on 3% higher average trade prices and 3% higher shipments.



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Operating Costs. CAC cost of products sold at $164.2 million in the current
quarter, including depreciation, depletion and amortization, increased $20.9 million from the prior year period. Cost of products sold at $508.0 million in the current nine-month period increased $41.0 million. Cement plant downtime and higher
maintenance costs increased cement unit costs.



Selling, general and administrative expense at $9.3 million in the current quarter, including depreciation and amortization, decreased $400,000 from the prior year period due primarily to lower bad debt expense. Selling, general and
administrative expense at $34.2 million in the current nine-month period increased $1.3 million from the prior year period due to higher general expenses.



Other income in the current quarter and nine-month periods includes gains of $3.8 million and $6.3 million, respectively, from routine
sales of surplus operating assets. The current nine-month period also includes a gain of $6.2 million from the sale of emissions credits associated with the Companys expanded shale and clay aggregate operation in south Texas. Other income in
the prior year quarter and nine-month periods includes a gain of $34.4 million from the sale of the Companys brick production facilities in Texas and Louisiana.



Steel Operations



Steel operating profit at $34.8 million in the current quarter increased $23.2 million from the prior year period. Operating profit at
$135.7 million in the current nine-month period increased $140.0 million from the prior year period. Margins that began to recover in January 2004 have generally stabilized as higher selling prices have more than offset higher scrap costs despite
continued low levels of nonresidential construction. Overall shipments in the current quarter declined 30% from the prior year period as customers reduced their calendar year-end inventories while in the prior year period customers increased
inventories in anticipation of higher prices.



Net Sales. Steel sales at $259.1 million in the current quarter increased $17.4 million from the prior year period. Structural steel sales increased $12.5 million on 48% higher average realized prices and 27% lower shipments. Bar
mill sales increased $7.1 million on 82% higher average realized prices and 37% lower shipments.



Steel sales at $799.0 million in the current nine-month period increased $201.5 million from the prior year period. Structural steel sales increased $145.9 million on 59% higher average realized
prices and 15% lower shipments. Bar mill sales increased $53.9 million on 81% higher average realized prices and 20% lower shipments.



Operating Costs. Steel cost of products sold at $219.8 million in the current quarter, including depreciation and amortization,
decreased $5.6 million from the prior year period. Cost of products sold at $648.1 million in the current nine-month period increased $59.9 million from the prior year period. Higher raw material costs have increased unit costs. During the past
year, the Company experienced unprecedented increases in the cost of steel scrap, the principal raw material used in its steel production. In recent months scrap costs have moderated but remain at historically high levels.



Selling, general and administrative expense at $6.4 million
in the current quarter increased $800,000 from the prior year period due to higher incentive compensation expense. Selling, general and administrative expense at $18.9 million in the current nine-month period increased $300,000 from the prior year
period as higher incentive compensation expense was partially offset by lower bad debt and general expenses.



Other income in the prior year nine-month period included $4.2 million resulting from the Companys litigation against certain
graphite electrode suppliers.



Corporate Resources



Selling, general and administrative
expense at $8.8 million in the current quarter, including depreciation and amortization, increased $1.2 million from the prior year period. Selling, general and administrative expense at $24.2 million in the current nine-month period increased $2.6
million from the prior year period. Higher incentive compensation expense was partially offset by lower general expenses in the current periods.



Other income in the current nine-month period increased from the prior year period due to higher real estate and interest income.



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##### Table of Contents

Interest Expense



Interest expense at $51.9 million in the current nine-month period decreased $4.0 million from the prior
year period primarily as a result of the repayment of life insurance contract distributions.



Interest rate swap agreements associated with $300 million of the senior notes reduced interest expense $4.1 million and $4.2 million in the nine-month periods ended February 28, 2005 and
February 29, 2004, respectively. On February 14, 2005, the Company terminated its outstanding interest rate swap agreements resulting in a loss of $6.3 million. The loss has been recorded as a decrease in the carrying value of the Companys
long-term debt and will be amortized as an adjustment to interest expense over the remaining term of the senior notes.



Loss on Early Retirement of Debt



The Company recognized an ordinary loss on early retirement of debt of $11.2 million in the prior year nine-month period as a result of
the June 2003 refinancing.



Income Taxes



The Companys effective tax rate is estimated at 32.4%
compared to 26.2% in the prior year period. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense.



The American Jobs Creation Act of 2004, among other things,
allows a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. The Company is currently evaluating the impact of the new law on its future taxable income. For financial reporting
purposes, any deductions for qualified domestic production activities will be accounted for as a special deduction rather than as a rate reduction.



Cumulative Effect of Accounting Change  Net of Income Taxes



Effective June 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143,
Accounting for Asset Retirement Obligations, which applies to legal obligations associated with the retirement of long-lived assets. Application of the new rules resulted in a cumulative charge of $1.1 million, net of income taxes of
$600,000 in the prior year nine-month period.



LIQUIDITY AND
CAPITAL RESOURCES



In addition to cash and cash
equivalents at February 28, 2005 of $164.7 million, the Companys sources of liquidity include cash from operations, borrowings available under its $100 million senior secured credit facility and distributions available under its investments in
life insurance contracts.



Senior Secured
Credit Facility.The Company has available a $100 million senior secured credit facility expiring June 6, 2007. Borrowings bear annual interest either at the LIBOR rate plus 2.0% or the prime rate. These interest rate margins are subject to
financial performance price adjustments. Commitment fees at an annual rate of .375% are paid on the unused portion of the facility.



No borrowings were outstanding under the facility at February 28, 2005; however, $27.1 million of the facility was utilized to support
letters of credit. Borrowings under the facility are limited based on the net amount of eligible accounts receivable. In addition, there is the requirement to meet certain financial tests and to maintain certain financial ratios if the excess
availability under the facility falls below $30 million, including maintaining a fixed charge coverage ratio and meeting a minimum tangible net worth test.



The agreement contains covenants restricting, among other things, prepayment or redemption of notes, distributions, repurchases of capital
stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. Cash dividends paid on common stock are limited to an annual amount of $7.0 million.



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The facility is collateralized by first priority liens on substantially all of the
Companys existing and future acquired accounts receivable, inventory, deposit accounts, and certain of its general intangibles. The Company may terminate the facility at any time, and under certain circumstances may be required to pay a
termination fee.



Investments in Life
Insurance Contracts.During the quarter ended August 31, 2004, distributions from the Companys investments in life insurance contracts in the amount of $51.2 million were repaid. These funds are available for redistribution at the election
of the Company.



Historically, the
Company has financed major capital expansion projects with cash from operations and long-term borrowings. Working capital requirements and capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of
its operations are funded with cash from operations. The fiscal year 2005 capital expenditure budget for these activities is estimated currently at approximately $75 million.



The following is a summary of the Companys estimated future payments under its material contractual
obligations as of February 28, 2005.





|                                    |  |   |                           |  |   |        |  |   |        |  |   |        |  |   |           |  |   |           
|----------------------------------- |  | - | ------------------------- |  | - | ------ |  | - | ------ |  | - | ------ |  | - | --------- |  | - | ----------
|                                   
|                                    |  |   | Future Payments by Period
|In thousands                        |  |   | Total                     |  |   | 2006   |  |   | 2007   |  |   | 2008   |  |   | 2009-2010 |  |   | After 2010
|                                   
|                                    |  |   |                           |  |   |       
|Long-term debt(1)                   |  | $ | 604,194                   |  | $ | 687    |  | $ | 683    |  | $ | 1,475  |  | $ | --        |  | $ | 601,349   
|Convertible subordinated debentures |  |   | 199,937                   |  |   | --     |  |   | --     |  |   | --     |  |   | --        |  |   | 199,937   
|Leases(2)                           |  |   | 53,410                    |  |   | 14,817 |  |   | 7,440  |  |   | 6,419  |  |   | 11,017    |  |   | 13,717    
|Purchased gas supply contracts(3)   |  |   | 46,748                    |  |   | 6,088  |  |   | 6,088  |  |   | 6,088  |  |   | 12,176    |  |   | 16,308    
|In-plant mill services(4)           |  |   | 32,807                    |  |   | 4,453  |  |   | 4,453  |  |   | 4,453  |  |   | 8,906     |  |   | 10,542    
|                                    |  |   |                           |  |   |        |  |   |        |  |   |        |  |   |           |  |   |           
|Total contractual obligations       |  | $ | 937,096                   |  | $ | 26,045 |  | $ | 18,664 |  | $ | 18,435 |  | $ | 32,099    |  | $ | 841,853   
|                                    |  |   |                           |  |   |        |  |   |        |  |   |        |  |   |           |  |   |           
|                                    |  |   |                           |  |   |       
|                                    |  |   |                           |  |   |        |  |   |        |  |   |        |  |   |           |  |   |           

| | (1) | The Companys outstanding letters of credit issued under the senior secured credit facility generally only collateralize payment of recorded
liabilities.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The Company leases certain mobile and other equipment used in its
operations under operating leases that may in the normal course of business be renewed or replaced by subsequent leases. Future payments under leases exclude mineral rights which are insignificant and are generally required only for products
produced.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The Company purchases processed gases for use at its steel facilities
under long-term supply contracts that require a minimum amount of processed gases be purchased.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The Company purchases in-plant mill services under long-term contracts
that require a minimum amount of services be purchased.
| | --- | ------------------------------------------------------------------------------------------------------------------------------





As discussed in Notes to Consolidated Financial Statements entitled Retirement Plans on pages 14 through 15, the Company contributed $4.1 million to a defined benefit pension plan during the nine-month
period ended February 28, 2005. The Company is not able to reasonably estimate its future required contributions. The Company paid benefits under a health benefit plan during the nine-month period ended February 28, 2005 at an annual rate of
$500,000. The Company paid benefits under a series of non-qualified defined benefit plans during the nine-month period ended February 28, 2005 at an annual rate of $2.3 million.



We expect cash and cash equivalents, cash from operations, available borrowings under the senior secured
credit facility and available distributions under the investments in life insurance contracts to be sufficient to provide funds for capital expenditure commitments, scheduled debt repayments and working capital needs for at least the next year.



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##### Table of Contents

Cash Flows



Net cash provided by operations was $97.5 million in the current nine-month period, compared to $61.0
million used in the prior year period. Operating cash flows, excluding repurchases of trade receivables, increased $43.0 million primarily as a result of increased net income and the related effect on deferred taxes partially offset by changes in
working capital items. Steel inventories increased $67.1 million as a result of lower shipments and higher scrap costs. Steel prepaid expenses increased $7.0 million as a result of the scheduled shutdown to refurbish the Steel production facilities.
In the prior year period, the Company funded the repurchase of $115.5 million of trade receivables out of the proceeds of the June 2003 refinancing.



Net cash used by investing activities was $102.4 million in the current nine-month period, compared to $13.8 million provided in the prior
year period. Capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of the Companys operations excluding major plant expansions were $48.8 million, up $24.1 million from the prior year
period. The Company increased its investments in life insurance contracts $59.3 million over the prior year period, primarily as a result of repaying $51.2 million in prior distributions.



Net cash provided by financing activities was $28.0 million in the current nine-month period, compared to
$97.8 million in the prior year period. Proceeds from stock option exercises increased $37.9 million from the prior year period. The Company terminated its interest rate swap agreements resulting in a loss of $6.3 million. The proceeds from the June
2003 refinancing net of issuance and retirement costs funded the repurchase of trade receivables. The Companys quarterly cash dividend of $.075 per common share remained unchanged from the prior year period.





OTHER ITEMS



Environmental Matters



The Company is subject to federal, state and local
environmental laws and regulations concerning, among other matters, air emissions, furnace dust disposal and wastewater discharge. The Company believes it is in substantial compliance with applicable environmental laws and regulations; however, from
time to time the Company receives claims from federal and state environmental regulatory agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience in dealing
with such claims in the past and the information currently available to it regarding any such claims that are currently unresolved, the Company believes that such claims will not have a material impact on its financial condition or results of
operations. Despite the Companys compliance and experience, it is possible that the Company could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state
laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the Company.



Market Risk



Historically, the Company has not entered into derivatives or other financial instruments for trading or speculative purposes.
Because of the short duration of the Companys investments, changes in market interest rates would not have a significant impact on their fair value.



The Company has $600 million of 10.25% fixed-rate senior notes outstanding. The fair value of the debt will vary as interest rates change.
On February 14, 2005, the Company terminated its interest rate swap agreements on $300 million of the underlying fixed rate debt. The swaps had changed the characteristics of the interest payments from fixed rate payments to short-term LIBOR-based
variable rate payments in order to achieve a mix of interest rates on the Companys long-term debt which, over time, was expected to moderate financing costs. At February 28, 2005, the fair value of long-term debt estimated based on
broker/dealer quoted market prices, was approximately $682.9 million compared to a carrying value of $604.2 million.



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Critical Accounting Policies



The preparation of financial statements and accompanying notes in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The critical accounting
policies that affect its more complex judgments and estimates are described in the Companys Annual Report on Form 10-K for the year ended May 31, 2004.



New Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based Payment.
SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB Opinion No. 25. Among other items, SFAS No. 123R eliminates the use of APB Opinion No. 25 and the intrinsic value method of
accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS No. 123R
is the first reporting period beginning after June 15, 2005, which is the second quarter of the Companys fiscal year ending May 31, 2006. The Company currently expects to adopt SFAS No. 123R effective September 1, 2005 using the modified
prospective method. Under the modified prospective method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after
that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123R. Financial information for periods prior to the date of adoption of SFAS No. 123R would not be restated. The
Company currently utilizes a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, the standard also permits the use
of a lattice model. The Company has not yet determined which model it will use to measure the fair value of awards of equity instruments to employees upon the adoption of SFAS No. 123R.



The adoption of SFAS No. 123R will have a significant effect
on the Companys future results of operations. However, it will not have an impact on the Companys consolidated financial position. The impact of SFAS No. 123R on the Companys results of operations can not be predicted at this time,
because it will depend on the number of equity awards granted in the future, as well as the model used to value the awards. However, had the Company adopted the requirements of SFAS No. 123R in prior periods, the impact would have approximated the
amounts disclosed in the Notes to Consolidated Financial Statements entitled Stock-based Compensation on pages 9 and 10 .



In November 2004, the Financial Accounting Standards Board issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter
4, which will become effective for the Company beginning June 1, 2006. This standard clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be expensed as incurred and not included in
overhead. In addition, this standard requires that the allocation of fixed production overhead costs to inventory be based on the normal capacity of the production facilities. The Company is currently evaluating the potential impact of this standard
on its financial position and results of operations.



Spin-off of Steel Operations



On December 14, 2004, the Companys Board of Directors approved a plan to spin-off its wholly-owned steel operations. While many details of the spin-off have not been finalized, the steel operations will be placed in a new holding
company named Chaparral Steel Company, whose stock will be distributed to the Companys shareholders in a transaction that is expected to take the form of a tax-free stock dividend. Chaparral Steel Company has filed a Registration Statement on
Form 10 with the Securities and Exchange Commission. The transaction is subject to the following: confirmation that the distribution will be tax-free, continued favorable market conditions, satisfaction of U.S. Securities and Exchange Commission
requirements and other customary conditions. It is expected that the distribution will be completed during the quarter ending August 31, 2005.



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Cautionary Statement for Purposes of the Safe Harbor Provisions of the

Private Securities Litigation Reform Act of 1995



Certain statements contained in this quarterly report are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.
Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on the Companys business, construction activity in the Companys markets, abnormal
periods of inclement weather, changes in the cost of raw materials, fuel and energy, unscheduled plant shutdowns and the impact of environmental laws and other regulations. For further information refer to the Companys Annual Report on Form
10-K for the year ended May 31, 2004.





Item 4.    Controls and Procedures



The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the specified time periods. As of the end of the period covered by this Quarterly Report on Form 10-Q, the Companys Chief Executive Officer and Chief Financial Officer evaluated, with the participation of the
Companys management, the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the evaluation, which disclosed no significant deficiencies or material
weaknesses, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective. There were no significant changes in the Companys internal controls over
financial reporting that occurred during the Companys most recent fiscal quarter that have materially affected or is reasonably likely to materially affect the Companys internal control over financial reporting.





PART II.    OTHER INFORMATION



Item 1.    Legal Proceedings



The information required by this item is included in the section of the Notes to Consolidated Financial Statements entitled Legal Proceedings and Contingent Liabilities presented in Part I on page 14 and
incorporated herein by reference.



Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds



The shares of the Registrants Common Stock, $1 par value, are traded on the New York Stock Exchange (ticker symbol TXI). The
restriction on the payment of dividends described in the Notes to Consolidated Financial Statements entitled Long-term Debt on pages 11 and 12 is incorporated herein by reference.



Issuer Purchases of Equity Securities



The Company is restricted by its loan covenants from
purchasing its Common Stock on the open market. However, the Company may repurchase shares of Common Stock in connection with so-called stock swap exercises of employee stock options in which shares are surrendered or deemed surrendered
to the Company to pay the exercise price or to satisfy tax withholding obligations. No such repurchases occurred during the three-month period ended February 28, 2005.



Unregistered Sales of Equity Securities



During the period from January 1997 through January 2004, each non-employee Director received an annual
grant of 500 restricted shares of unregistered Common Stock. During the period from January 1998 through January 2004, the Board annually approved an additional grant of 2,000 restricted shares of unregistered Common Stock to the Chairman of the
Board. The shares are held by the Company until the Director ceases his/her tenure as a Director. At February 28, 2005, 23,500 restricted shares of unregistered Common Stock issued to continuing Directors were being held by the Company. No
unregistered shares of Common Stock were delivered to directors during the three-month period ended February 28, 2005.



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A former executive of the Company elected to defer a portion of his annual incentive
compensation under a deferred compensation agreement. The compensation so deferred was denominated in shares of the Companys Common Stock determined by references to the average market price on the date of deferral. Dividends were credited to
the account in the form of Common Stock equivalents at a value equal to the fair market value of the Common Stock on the date of the payment of such dividend. On January 14, 2005, the Company issued 3,123 unregistered shares of Common Stock in final
settlement of the $102,950 of incentive compensation deferred and dividends credited.



The unregistered shares were issued in reliance upon Section 4(2) of the Securities Act of 1933, as amended.



Item 6.    Exhibits



The following exhibits are included herein:



(12.1) Computation of Ratios of Earnings to Fixed Charges



(15.1) Letter re: Unaudited Interim Financial Information



(31.1) Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer



(31.2) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer



(32.1) Section 1350 Certification of Chief Executive Officer



(32.2) Section 1350 Certification of Chief
Financial Officer



The remaining exhibits have
been omitted because they are not applicable or the information required therein is included elsewhere in the financial statements or notes thereto.



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##### Table of Contents

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.





|              |  |  |  |                                                               
|------------- |  |  |  | --------------------------------------------------------------
|              |  |  |  | TEXAS INDUSTRIES, INC.                                        
|              |  | 
|April 8, 2005 |  |  |  | /s/  Richard M. Fowler                                        
|              |  |  |  | Richard M. Fowler                                             
|              |  |  |  | Executive Vice President - Finance and Chief Financial Officer
|              |  |  |  | (Principal Financial Officer)                                 
|              |  | 
|April 8, 2005 |  |  |  | /s/  James R. McCraw                                          
|              |  |  |  | James R. McCraw                                               
|              |  |  |  | Vice President  Accounting and Information Services          
|              |  |  |  | (Principal Accounting Officer)                                



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##### Table of Contents

INDEX TO EXHIBITS





|         |  |                                                                   |  |     
|-------- |  | ----------------------------------------------------------------- |  | ----
|Exhibits |  |                                                                   |  | Page
|         |  |                                                                  
|12.1     |  | Computation of Ratios of Earnings to Fixed Charges                |  | 33  
|         |  |                                                                  
|15.1     |  | Letter re: Unaudited Interim Financial Information                |  | 34  
|         |  |                                                                  
|31.1     |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |  | 35  
|         |  |                                                                  
|31.2     |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |  | 36  
|         |  |                                                                  
|32.1     |  | Section 1350 Certification of Chief Executive Officer             |  | 37  
|         |  |                                                                  
|32.2     |  | Section 1350 Certification of Chief Financial Officer             |  | 38  



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