##### Table of Contents

---

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 November 30, 2004



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.    Yes  x    No ̈



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



There were 22,215,046 shares of the Registrants Common Stock, $1.00 par
value, outstanding as of January 4, 2005.



---



---

##### Table of Contents

INDEX



TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                              |  |                                                                                                                          |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | --
|                              |  | Page                                                                                                                    
|PART I. FINANCIAL INFORMATION |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Financial Statements                                                                                                     |  |   
|                              |  |                                                                                                                         
|                              |  | Consolidated Balance Sheets  November 30, 2004 and May 31, 2004                                                         |  | 3 
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Operations  three months and six months ended November 30, 2004 and November 30, 2003        |  | 4 
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Cash Flows  six months ended November 30, 2004 and November 30, 2003                         |  | 5 
|                              |  |                                                                                                                         
|                              |  | Notes to Consolidated Financial Statements                                                                               |  | 6 
|                              |  |                                                                                                                         
|                              |  | Report of Independent Registered Public Accounting Firm                                                                  |  | 21
|                              |  |                                                                                                                         
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 22
|                              |  |                                                                                                                         
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk  the information required by this item is included in Item
2 |  |  
|                              |  |                                                                                                                         
|Item 4.                       |  | Controls and Procedures                                                                                                  |  | 28
|                              | 
|PART II.
OTHER INFORMATION    |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Legal Proceedings                                                                                                        |  | 28
|                              |  |                                                                                                                         
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                              |  | 28
|                              |  |                                                                                                                         
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                      |  | 29
|                              |  |                                                                                                                         
|Item 6.                       |  | Exhibits                                                                                                                 |  | 30
|                              | 
|SIGNATURES                    |  | 31                                                                                                                      



- 2 -



---

##### Table of Contents

CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                           |  |                              |           |   |             |   |           |  
|------------------------------------------ |  | ---------------------------- | --------- | - | ----------- | - | --------- | -
|In thousands                               |  | (Unaudited) November 30,2004 |           |   | May 31,2004 |  
|ASSETS                                     |  |                              |           |   |             |   |           |  
|CURRENT ASSETS                             |  |                              |           |   |             |   |           |  
|Cash and cash equivalents                  |  | $                            | 181,941   |   |             | $ | 141,628   |  
|Accounts receivable - net                  |  |                              | 177,100   |   |             |   | 211,535   |  
|Inventories                                |  |                              | 330,487   |   |             |   | 266,533   |  
|Deferred income taxes and prepaid expenses |  |                              | 51,343    |   |             |   | 34,954    |  
|                                           |  |                              |           |   |             |   |           |  
|TOTAL CURRENT ASSETS                       |  |                              | 740,871   |   |             |   | 654,650   |  
|                                           |  |                             
|OTHER ASSETS                               |  |                              |           |   |             |   |           |  
|Goodwill                                   |  |                              | 146,474   |   |             |   | 146,474   |  
|Real estate and investments                |  |                              | 106,239   |   |             |   | 47,006    |  
|Deferred charges and intangibles           |  |                              | 34,152    |   |             |   | 32,354    |  
|                                           |  |                              |           |   |             |   |           |  
|                                           |  |                              | 286,865   |   |             |   | 225,834   |  
|PROPERTY, PLANT AND EQUIPMENT              |  |                              |           |   |             |   |           |  
|Land and land improvements                 |  |                              | 222,800   |   |             |   | 220,812   |  
|Buildings                                  |  |                              | 101,213   |   |             |   | 101,192   |  
|Machinery and equipment                    |  |                              | 1,740,311 |   |             |   | 1,733,065 |  
|Construction in progress                   |  |                              | 38,572    |   |             |   | 24,405    |  
|                                           |  |                              |           |   |             |   |           |  
|                                           |  |                              | 2,102,896 |   |             |   | 2,079,474 |  
|Less depreciation and depletion            |  |                              | 1,059,919 |   |             |   | 1,015,825 |  
|                                           |  |                              |           |   |             |   |           |  
|                                           |  |                              | 1,042,977 |   |             |   | 1,063,649 |  
|                                           |  |                              |           |   |             |   |           |  
|                                           |  | $                            | 2,070,713 |   |             | $ | 1,944,133 |  
|                                           |  |                              |           |   |             |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY       |  |                              |           |   |             |   |           |  
|CURRENT LIABILITIES                        |  |                              |           |   |             |   |           |  
|Accounts payable                           |  | $                            | 112,545   |   |             | $ | 108,557   |  
|Accrued interest, wages and other items    |  |                              | 87,021    |   |             |   | 78,699    |  
|Current portion of long-term debt          |  |                              | 694       |   |             |   | 699       |  
|                                           |  |                              |           |   |             |   |           |  
|TOTAL CURRENT LIABILITIES                  |  |                              | 200,260   |   |             |   | 187,955   |  
|                                           |  |                             
|LONG-TERM DEBT                             |  |                              | 605,195   |   |             |   | 598,412   |  
|                                           |  |                             
|CONVERTIBLE SUBORDINATED DEBENTURES        |  |                              | 199,937   |   |             |   | 199,937   |  
|                                           |  |                             
|DEFERRED INCOME TAXES AND OTHER CREDITS    |  |                              | 208,825   |   |             |   | 195,845   |  
|                                           |  |                             
|SHAREHOLDERS EQUITY                       |  |                              |           |   |             |   |           |  
|Common stock, $1 par value                 |  |                              | 25,067    |   |             |   | 25,067    |  
|Additional paid-in capital                 |  |                              | 276,458   |   |             |   | 261,455   |  
|Retained earnings                          |  |                              | 632,192   |   |             |   | 568,596   |  
|Cost of common stock in treasury           |  |                              | (72,739   | ) |             |   | (88,652   | )
|Pension liability adjustment               |  |                              | (4,482    | ) |             |   | (4,482    | )
|                                           |  |                              |           |   |             |   |           |  
|                                           |  |                              | 856,496   |   |             |   | 761,984   |  
|                                           |  |                              |           |   |             |   |           |  
|                                           |  | $                            | 2,070,713 |   |             | $ | 1,944,133 |  
|                                           |  |                              |           |   |             |   |           |  



See notes to consolidated financial
statements.



- 3 -



---

##### Table of Contents

(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------- | ------- | - | ----------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                             |  | Three months ended November 30, |         |   | Six months ended November 30, |  
|In thousands except per share                                |  | 2004                            |         |   | 2003                          |   |         | 2004 |  |   | 2003    |  
|NET SALES                                                    |  | $                               | 443,717 |   |                               | $ | 368,559 |      |  | $ | 943,571 |   |  | $ | 744,597 |  
|                                                             |  |                                 |         |  
|COSTS AND EXPENSES (INCOME)                                  |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Cost of products sold                                        |  |                                 | 366,087 |   |                               |   | 333,849 |      |  |   | 772,055 |   |  |   | 686,504 |  
|Selling, general and administrative                          |  |                                 | 26,212  |   |                               |   | 24,672  |      |  |   | 52,776  |   |  |   | 50,275  |  
|Interest                                                     |  |                                 | 17,017  |   |                               |   | 18,132  |      |  |   | 34,078  |   |  |   | 37,923  |  
|Loss on early retirement of debt                             |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   | 11,246  |  
|Other income                                                 |  |                                 | (11,746 | ) |                               |   | (90     | )    |  |   | (15,291 | ) |  |   | (6,286  | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|                                                             |  |                                 | 397,570 |   |                               |   | 376,563 |      |  |   | 843,618 |   |  |   | 779,662 |  
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGE      |  |                                 | 46,147  |   |                               |   | (8,004  | )    |  |   | 99,953  |   |  |   | (35,065 | )
|                                                             |  |                                 |         |  
|Income taxes (benefit)                                       |  |                                 | 15,190  |   |                               |   | (1,547  | )    |  |   | 33,113  |   |  |   | (13,974 | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|INCOME (LOSS) BEFORE ACCOUNTING CHANGE                       |  |                                 | 30,957  |   |                               |   | (6,457  | )    |  |   | 66,840  |   |  |   | (21,091 | )
|                                                             |  |                                 |         |  
|Cumulative effect of accounting change - net of income taxes |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   | (1,071  | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|NET INCOME (LOSS)                                            |  | $                               | 30,957  |   |                               | $ | (6,457  | )    |  | $ | 66,840  |   |  | $ | (22,162 | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Basic earnings (loss) per share                              |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) before accounting change                       |  | $                               | 1.42    |   |                               | $ | (.31    | )    |  | $ | 3.10    |   |  | $ | (1.00   | )
|Cumulative effect of accounting change                       |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   | (.05    | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                            |  | $                               | 1.42    |   |                               | $ | (.31    | )    |  | $ | 3.10    |   |  | $ | (1.05   | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Diluted earnings (loss) per share                            |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) before accounting change                       |  | $                               | 1.28    |   |                               | $ | (.31    | )    |  | $ | 2.79    |   |  | $ | (1.00   | )
|Cumulative effect of accounting change                       |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   | (.05    | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                            |  | $                               | 1.28    |   |                               | $ | (.31    | )    |  | $ | 2.79    |   |  | $ | (1.05   | )
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Average shares outstanding                                   |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Basic                                                        |  |                                 | 21,804  |   |                               |   | 21,153  |      |  |   | 21,580  |   |  |   | 21,150  |  
|Diluted                                                      |  |                                 | 25,576  |   |                               |   | 21,153  |      |  |   | 25,284  |   |  |   | 21,150  |  
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Cash dividends per share                                     |  | $                               | .075    |   |                               | $ | .075    |      |  | $ | .15     |   |  | $ | .15     |  
|                                                             |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  



See notes to consolidated financial
statements.



- 4 -



---

##### Table of Contents

(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                       |  |                               |         |   |      |   |          |  
|------------------------------------------------------ |  | ----------------------------- | ------- | - | ---- | - | -------- | -
|                                                       |  | Six months ended November 30, |        
|In thousands                                           |  | 2004                          |         |   | 2003 |  
|OPERATING ACTIVITIES                                   |  |                               |         |   |      |   |          |  
|Net income (loss)                                      |  | $                             | 66,840  |   |      | $ | (22,162  | )
|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                             |  |                               | (2,279  | ) |      |   | (1,292   | )
|Depreciation, depletion and amortization               |  |                               | 47,333  |   |      |   | 48,809   |  
|Deferred income taxes (benefit)                        |  |                               | 20,846  |   |      |   | (14,334  | )
|Income tax benefit from stock option exercises         |  |                               | 7,000   |   |      |   |         |  
|Other - net                                            |  |                               | (340    | ) |      |   | 544      |  
|Changes in operating assets and liabilities            |  |                               |         |   |      |   |          |  
|Receivables repurchased                                |  |                               |        |   |      |   | (115,514 | )
|Accounts receivable - net                              |  |                               | 34,482  |   |      |   | 1,615    |  
|Inventories and prepaid expenses                       |  |                               | (77,046 | ) |      |   | 9,135    |  
|Accounts payable and accrued liabilities               |  |                               | 11,344  |   |      |   | 25,121   |  
|Other credits                                          |  |                               | 218     |   |      |   | 1,384    |  
|                                                       |  |                               |         |   |      |   |          |  
|Net cash provided (used) by operations                 |  |                               | 108,398 |   |      |   | (54,377  | )
|                                                       |  |                              
|INVESTING ACTIVITIES                                   |  |                               |         |   |      |   |          |  
|Capital expenditures                                   |  |                               | (27,120 | ) |      |   | (15,953  | )
|Proceeds from disposal of assets                       |  |                               | 2,674   |   |      |   | 2,481    |  
|Investments in life insurance contracts                |  |                               | (57,761 | ) |      |   | 13       |  
|Other - net                                            |  |                               | (5,341  | ) |      |   | (1,664   | )
|                                                       |  |                               |         |   |      |   |          |  
|Net cash used by investing                             |  |                               | (87,548 | ) |      |   | (15,123  | )
|                                                       |  |                              
|FINANCING ACTIVITIES                                   |  |                               |         |   |      |   |          |  
|Long-term borrowings                                   |  |                               |        |   |      |   | 718,097  |  
|Debt retirements                                       |  |                               | (348    | ) |      |   | (591,969 | )
|Debt issuance costs                                    |  |                               |        |   |      |   | (16,016  | )
|Debt retirement costs                                  |  |                               |        |   |      |   | (8,505   | )
|Proceeds from stock option exercises                   |  |                               | 23,116  |   |      |   | 27       |  
|Common dividends paid                                  |  |                               | (3,244  | ) |      |   | (3,162   | )
|Other - net                                            |  |                               | (61     | ) |      |   | (26      | )
|                                                       |  |                               |         |   |      |   |          |  
|Net cash provided by financing                         |  |                               | 19,463  |   |      |   | 98,446   |  
|                                                       |  |                               |         |   |      |   |          |  
|Increase in cash and cash equivalents                  |  |                               | 40,313  |   |      |   | 28,946   |  
|                                                       |  |                              
|Cash and cash equivalents at beginning of period       |  |                               | 141,628 |   |      |   | 6,204    |  
|                                                       |  |                               |         |   |      |   |          |  
|Cash and cash equivalents at end of period             |  | $                             | 181,941 |   |      | $ | 35,150   |  
|                                                       |  |                               |         |   |      |   |          |  



See notes to consolidated financial
statements.



- 5 -



---

##### Table of Contents

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, with several products marketed throughout the United States. 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, for markets in North America.



On December 14, 2004, the Companys Board of Directors approved a plan
to spin-off its wholly-owned steel business. While details of the spin-off have not been finalized the transaction is expected to take the form of a tax-free stock dividend to the Companys shareholders. 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 in the August 2005 quarter.



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 six-month period ended November 30, 2004, 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 $26.7 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.



- 6 -



---

##### Table of Contents

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 shut-downs to refurbish the Steel facilities are amortized over the benefited period, typically 12 to 24 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 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 November 30, 2004 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 $10.2 million and $11.2 million at November 30, 2004 and May 31, 2004, respectively.



Investments are composed primarily of life insurance contracts that may be used to fund certain Company benefit agreements.
The contracts, recorded at their net cash surrender value, totaled $94.4 million (net of distributions of $1.3 million) at November 30, 2004 and $34.2 million (net of distributions of $52.5 million) at May 31, 2004. During the August 2004 quarter
distributed amounts totaling $51.2 million were repaid. Charges incurred on the distributions of $100,000 and $1.7 million in the six-month periods ended November 30, 2004 and 2003, respectively, were included in interest expense.



Deferred Charges and Intangibles.Deferred charges are composed
primarily of debt issuance costs that totaled $18.4 million and $19.7 million at November 30, 2004 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 $2.7 million) at November 30, 2004 and $2.1 million (net of
accumulated amortization of $3.8 million) at May 31, 2004. Amortization expense incurred was $200,000 in both six-month periods ended November 30, 2004 and 2003. Estimated amortization expense for each of the five succeeding years is $300,000 per
year.



Other Credits.Other credits of $60.1 million at
November 30, 2004 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.



- 7 -



---

##### Table of Contents

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 six-month periods ended November 30, 2004 and 2003, are
as follows:



|                               |  |      |       |   |      |   |       |  
|------------------------------ |  | ---- | ----- | - | ---- | - | ----- | -
|In thousands                   |  | 2004 |       |   | 2003 |  
|Balance at beginning of period |  | $    | 4,992 |   |      | $ |      |  
|Initial obligation             |  |      |      |   |      |   | 4,092 |  
|Revisions                      |  |      |      |   |      |   | 554   |  
|Accretion expense              |  |      | 180   |   |      |   | 178   |  
|Settlements                    |  |      | (154  | ) |      |   | (126  | )
|                               |  |      |       |   |      |   |       |  
|Balance at end of period       |  | $    | 5,018 |   |      | $ | 4,698 |  
|                               |  |      |       |   |      |   |       |  



Pension Liability
Adjustment.The pension liability adjustment to shareholders equity of $4.5 million at both November 30, 2004 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 six-month periods ended November 30, 2004 and 2003.



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 November 2004 quarter includes a gain of $6.2 million resulting from the sale of emissions credits associated with the Companys expanded shale and clay aggregate operations in south Texas.
Routine sales of surplus operating assets and real estate resulted in gains of $4.5 million and $1.3 million in the six-month periods ended November 30, 2004 and 2003, respectively. Also included in other income was $4.2 million resulting from the
Companys litigation against certain graphite electrode suppliers in the six-month period ended November 30, 2003.



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 upon retirement or at such earlier date as
approved by 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.



- 8 -



---

##### 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 November 30 |        |      | Six months ended November 30 |       
|In thousands except per share                      |  | 2004                           |        | 2003 |                              |        | 2004 |  | 2003 |       
|Earnings                                           |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Income (loss) before accounting change             |  | $                              | 30,957 |      | $                            | (6,457 | )    |  | $    | 66,840 |  | $ | (21,091 | )
|Cumulative effect of accounting change             |  |                                |       |      |                              |       |      |  |      |       |  |   | (1,071  | )
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Net income (loss)                                  |  | $                              | 30,957 |      | $                            | (6,457 | )    |  | $    | 66,840 |  | $ | (22,162 | )
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Shares                                             |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Weighted-average shares outstanding                |  |                                | 21,753 |      |                              | 21,082 |      |  |      | 21,521 |  |   | 21,078  |  
|Contingently issuable shares                       |  |                                | 51     |      |                              | 71     |      |  |      | 59     |  |   | 72      |  
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Basic weighted-average shares                      |  |                                | 21,804 |      |                              | 21,153 |      |  |      | 21,580 |  |   | 21,150  |  
|                                                   |  |                                |        |     
|Convertible subordinated debentures                |  |                                | 2,888  |      |                              |       |      |  |      | 2,888  |  |   |        |  
|Stock option and award dilution                    |  |                                | 884    |      |                              |       |      |  |      | 816    |  |   |        |  
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Diluted weighted-average shares*                   |  |                                | 25,576 |      |                              | 21,153 |      |  |      | 25,284 |  |   | 21,150  |  
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Basic earnings (loss) per share                    |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Income (loss) before accounting change             |  | $                              | 1.42   |      | $                            | (.31   | )    |  | $    | 3.10   |  | $ | (1.00   | )
|Cumulative effect of accounting change             |  |                                |       |      |                              |       |      |  |      |       |  |   | (.05    | )
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Net income (loss)                                  |  | $                              | 1.42   |      | $                            | (.31   | )    |  | $    | 3.10   |  | $ | (1.05   | )
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Diluted earnings (loss) per share                  |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Income (loss) before accounting change             |  | $                              | 1.28   |      | $                            | (.31   | )    |  | $    | 2.79   |  | $ | (1.00   | )
|Cumulative effect of accounting change             |  |                                |       |      |                              |       |      |  |      |       |  |   | (.05    | )
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Net income (loss)                                  |  | $                              | 1.28   |      | $                            | (.31   | )    |  | $    | 2.79   |  | $ | (1.05   | )
|                                                   |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|*       Shares excluded due to antidilutive effect |  |                                |        |      |                              |        |      |  |      |        |  |   |         |  
|Convertible subordinated debentures                |  |                                |       |      |                              | 2,888  |      |  |      |       |  |   | 2,888   |  
|Stock options and awards                           |  |                                |       |      |                              | 3,270  |      |  |      | 259    |  |   | 3,281   |  



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 recognizing compensation expense ratably over the vesting period. The weighted-average fair value of options granted in the
six-month period ended November 30, 2004 was $20.10. 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 .61%, volatility factor of .365, risk-free interest rate of 3.78% and expected life in years of 6.4.



- 9 -



---

##### 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 November 30, |        |   | Six months ended November 30, |  
|In thousands except per share                                                                             |  | 2004                            |        |   | 2003                          |   |        | 2004 |  |   | 2003   |  
|Net income (loss)                                                                                         |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |         |  
|As reported                                                                                               |  | $                               | 30,957 |   |                               | $ | (6,457 | )    |  | $ | 66,840 |   |  | $ | (22,162 | )
|Plus: stock-based compensation included in the determination of net income (loss) as reported, net of tax |  |                                 | 1,292  |   |                               |   | 117    |      |  |   | 1,744  |   |  |   | 144     |  
|Less: fair value of stock-based compensation, net of tax                                                  |  |                                 | (635   | ) |                               |   | (1,021 | )    |  |   | (1,897 | ) |  |   | (1,989  | )
|                                                                                                          |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |         |  
|Pro forma                                                                                                 |  | $                               | 31,614 |   |                               | $ | (7,361 | )    |  | $ | 66,687 |   |  | $ | (24,007 | )
|                                                                                                          |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |         |  
|Basic earnings (loss) per share                                                                           |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |         |  
|As reported                                                                                               |  | $                               | 1.42   |   |                               | $ | (.31   | )    |  | $ | 3.10   |   |  | $ | (1.05   | )
|Pro forma                                                                                                 |  |                                 | 1.45   |   |                               |   | (.35   | )    |  |   | 3.09   |   |  |   | (1.14   | )
|                                                                                                          |  |                                 |        |  
|Diluted earnings (loss) per share                                                                         |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |         |  
|As reported                                                                                               |  | $                               | 1.28   |   |                               | $ | (.31   | )    |  | $ | 2.79   |   |  | $ | (1.05   | )
|Pro forma                                                                                                 |  |                                 | 1.31   |   |                               |   | (.35   | )    |  |   | 2.78   |   |  |   | (1.14   | )



On December 16,
2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No. 123(R) would require the Company to measure all employee stock-based compensation awards using a fair value method and
record such expense in its consolidated financial statements. In addition, the adoption of SFAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from
share-based payment arrangements. SFAS No. 123(R) is effective beginning in the quarter ending November 30, 2005. The effect of the adoption of SFAS No. 123(R) is expected to be comparable to that being disclosed on a pro forma basis as a result of
applying the current fair value recognition provisions of SFAS No. 123.



WORKING CAPITAL



Working
capital totaled $540.6 million at November 30, 2004, compared to $466.7 million at May 31, 2004.



Accounts receivable are presented net of allowances for doubtful receivables of $3.7 million at November 30, 2004 and $5.3 million at May 31, 2004.
Provisions for bad debts charged to expense were $700,000 and $3.3 million in the six-month periods ended November 30, 2004 and 2003, respectively. Uncollectible accounts written off amounted to $2.3 million and $1.8 million in the six-month periods
ended November 30, 2004 and 2003, respectively.



Inventories
consist of:



|                           |  |                   |         |              |   |        
|-------------------------- |  | ----------------- | ------- | ------------ | - | -------
|In thousands               |  | November 30, 2004 |         | May 31, 2004
|Finished products          |  | $                 | 123,193 |              | $ | 86,395 
|Work in process            |  |                   | 64,819  |              |   | 56,440 
|Raw materials and supplies |  |                   | 142,475 |              |   | 123,698
|                           |  |                   |         |              |   |        
|                           |  | $                 | 330,487 |              | $ | 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 $58.7 million at
November 30, 2004 and $49.7 million at May 31, 2004.



- 10 -



---

##### Table of Contents

Accrued interest, wages and other items consist of:



|                         |  |                  |        |             |   |       
|------------------------ |  | ---------------- | ------ | ----------- | - | ------
|In thousands             |  | November 30,2004 |        | May 31,2004
|Interest                 |  | $                | 27,355 |             | $ | 28,412
|Employee compensation    |  |                  | 29,782 |             |   | 27,142
|Income taxes             |  |                  | 757    |             |   | 686   
|Property taxes and other |  |                  | 29,127 |             |   | 22,459
|                         |  |                  |        |             |   |       
|                         |  | $                | 87,021 |             | $ | 78,699
|                         |  |                  |        |             |   |       



LONG-TERM DEBT



Long-term debt is comprised of the
following:



|                                                                             |  |                  |         |   |              |   |         |  
|---------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------ | - | ------- | -
|In thousands                                                                 |  | November 30,2004 |         |   | May 31, 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                                                        |  |                  | (4,870  | ) |              |   | (12,570 | )
|Unamortized gains on termination                                             |  |                  | 7,526   |   |              |   | 8,102   |  
|Pollution control bonds due through 2007, interest rate 3.75% (75% of prime) |  |                  | 2,835   |   |              |   | 3,175   |  
|Other                                                                        |  |                  | 398     |   |              |   | 404     |  
|                                                                             |  |                  |         |   |              |   |         |  
|                                                                             |  |                  | 605,889 |   |              |   | 599,111 |  
|Less current maturities                                                      |  |                  | 694     |   |              |   | 699     |  
|                                                                             |  |                  |         |   |              |   |         |  
|                                                                             |  | $                | 605,195 |   |              | $ | 598,412 |  
|                                                                             |  |                  |         |   |              |   |         |  



Maturities of
long-term debt for each of the five succeeding years are $700,000 per year through 2007, $800,000 for 2008 and none for 2009.



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 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 November 30, 2004;
however, $24.7 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.



- 11 -



---

##### Table of Contents

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.The Company has outstanding interest rate swap agreements that have the economic effect of modifying the interest obligations associated with $100 million and $200 million of the senior
notes, effective January 30, 2004 and April 6, 2004, respectively, such that the interest payable effectively becomes variable based on six-month LIBOR, set on June 15thand December 15thof each
year. The interest rate swaps have been designated as fair value hedges and have no ineffective portion. The notional amounts and the termination dates match the principal amounts and maturities of the $300 million portion of the outstanding senior
notes. As a result of the interest rate swaps, the current effective interest rate on the hedged portion of the senior notes was reduced to 7.98%.



The amount of interest paid was $36.7 million and $8.0 million in the six-month periods ended November 30, 2004 and 2003, respectively. No interest was
capitalized in either of the six-month periods ended November 30, 2004 and 2003.



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 November 30, 2004, 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.



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.



- 12 -



---

##### Table of Contents

SHAREHOLDERS EQUITY



Common stock consists of:



|                                            |  |                  |  |            
|------------------------------------------- |  | ---------------- |  | -----------
|In thousands                                |  | November 30,2004 |  | May 31,2004
|Shares authorized                           |  | 40,000           |  | 40,000     
|Shares outstanding                          |  | 22,132           |  | 21,201     
|Shares held in treasury                     |  | 2,935            |  | 3,866      
|Shares reserved for stock options and other |  | 4,672            |  | 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 as approved by shareholders, in addition to other types of awards, provides that
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. Outstanding options include options granted under the Companys 1993 Stock Option Plan prior to its expiration in 2003.



A summary of option transactions for the six-month period ended November 30, 2004, follows:



|                                 |  |                     |   |  |                               |      
|-------------------------------- |  | ------------------- | - |  | ----------------------------- | -----
|                                 |  | Shares Under Option |   |  | Weighted-Average Option Price
|Outstanding at May 31, 2004      |  | 3,102,268           |   |  | $                             | 28.89
|Granted                          |  | 20,000              |   |  |                               | 49.73
|Exercised                        |  | (963,388            | ) |  |                               | 26.86
|Canceled                         |  | (12,400             | ) |  |                               | 29.87
|                                 |  |                     |   |  |                               |      
|Outstanding at November 30, 2004 |  | 2,146,480           |   |  | $                             | 29.99
|                                 |  |                     |   |  |                               |      



There were 1,073,740
shares exercisable at November 30, 2004. Outstanding options expire on various dates to November 1, 2014. The Company has reserved 2,480,000 shares for future awards under the Texas Industries 2004 Omnibus Equity Compensation Plan.



- 13 -



---

##### Table of Contents

INCOME TAXES



Federal income taxes for the interim periods ended November 30, 2004 and 2003, 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 2004 of 33.1% compared to 39.6% for 2003. The tax benefit attributed to cumulative effect of accounting change in 2003 is based on the
incremental tax rate of 35%. The Company made income tax payments of $8.7 million and $1.0 million in the six-month periods ended November 30, 2004 and 2003, respectively.



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 and the information currently available to it, 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 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
six-month periods ended November 30, 2004 and 2003, are as follows:



|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|---------------------------------- |  | --------------- | ------ | - | -------------- | - | ------ | ---- |  | - | ---- | - |  | - | ---- | -
|                                   |  | Pension Benefit |        |   | Health Benefit |  
|In thousands                       |  | 2004            |        |   | 2003           |   |        | 2004 |  |   | 2003 |  
|Three months ended November 30     |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|Service cost                       |  | $               | 109    |   |                | $ | 228    |      |  | $ | 23   |   |  | $ | 68   |  
|Interest cost                      |  |                 | 644    |   |                |   | 591    |      |  |   | 123  |   |  |   | 191  |  
|Expected return on plan assets     |  |                 | (611   | ) |                |   | (503   | )    |  |   |     |   |  |   |     |  
|Amortization of prior service cost |  |                 |       |   |                |   |       |      |  |   | (211 | ) |  |   | (87  | )
|Amortization of net actuarial loss |  |                 | 125    |   |                |   | 233    |      |  |   | 226  |   |  |   | 210  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|                                   |  | $               | 267    |   |                | $ | 549    |      |  | $ | 161  |   |  | $ | 382  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|Six months ended November 30       |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|Service cost                       |  | $               | 218    |   |                | $ | 457    |      |  | $ | 46   |   |  | $ | 135  |  
|Interest cost                      |  |                 | 1,288  |   |                |   | 1,182  |      |  |   | 246  |   |  |   | 383  |  
|Expected return on plan assets     |  |                 | (1,221 | ) |                |   | (1,006 | )    |  |   |     |   |  |   |     |  
|Amortization of prior service cost |  |                 |       |   |                |   |       |      |  |   | (422 | ) |  |   | (173 | )
|Amortization of net actuarial loss |  |                 | 250    |   |                |   | 466    |      |  |   | 452  |   |  |   | 420  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|                                   |  | $               | 535    |   |                | $ | 1,099  |      |  | $ | 322  |   |  | $ | 765  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  



The Company
contributed $4.1 million to the defined benefit pension plan during the six-month period ended November 30, 2004. The Company does not expect to make any additional contributions during the remainder of the current fiscal year.



- 14 -



---

##### Table of Contents

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 death and retirement benefits to substantially all of the Companys executive and key managerial employees. The plans are contributory but not funded. Life insurance contracts have been
purchased that may be used to fund the FSP payments. These insurance contracts, recorded at their net cash surrender value, totaled $94.4 million (net of distributions of $1.3 million) at November 30, 2004.



The amount of FSP benefit expense charged to costs and expenses in the
three-month and six-month periods ended November 30, 2004 and 2003, are as follows:



|                                  |  |             |       |   |      |   |       |  
|--------------------------------- |  | ----------- | ----- | - | ---- | - | ----- | -
|                                  |  | FSP Benefit |      
|In thousands                      |  | 2004        |       |   | 2003 |  
|Three months ended November 30    |  |             |       |   |      |   |       |  
|Service cost                      |  | $           | 572   |   |      | $ | 515   |  
|Interest cost                     |  |             | 469   |   |      |   | 463   |  
|Amortization of transition amount |  |             | 45    |   |      |   | 47    |  
|Recognized actuarial gain         |  |             |      |   |      |   | (14   | )
|Participant contributions         |  |             | (118  | ) |      |   | (116  | )
|                                  |  |             |       |   |      |   |       |  
|                                  |  | $           | 968   |   |      | $ | 895   |  
|                                  |  |             |       |   |      |   |       |  
|Six months ended November 30      |  |             |       |   |      |   |       |  
|Service cost                      |  | $           | 1,144 |   |      | $ | 1,030 |  
|Interest cost                     |  |             | 938   |   |      |   | 926   |  
|Amortization of transition amount |  |             | 90    |   |      |   | 94    |  
|Recognized actuarial gain         |  |             |      |   |      |   | (28   | )
|Participant contributions         |  |             | (254  | ) |      |   | (250  | )
|                                  |  |             |       |   |      |   |       |  
|                                  |  | $           | 1,918 |   |      | $ | 1,772 |  
|                                  |  |             |       |   |      |   |       |  



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.



- 15 -



---

##### Table of Contents

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.



- 16 -



---

##### Table of Contents

|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|---------------------------------------------------------- |  | -------------------- | --------- | --------------------- | - | -------------------------- |  | ------------------ | - |  | ------------ | ---------- | - |  | - | ---------
|In thousands                                               |  | TexasIndustries,Inc. |           | GuarantorSubsidiaries |   | Non- GuarantorSubsidiaries |  | EliminatingEntries |   |  | Consolidated
|Condensed consolidating balance sheet at November 30, 2004 |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|                                                           |  |                      |           |                       |  
|Cash and cash equivalents                                  |  | $                    | 174,343   |                       | $ | 7,598                      |  | $                  |  |  | $            |           |   |  | $ | 181,941  
|Accounts receivable - net                                  |  |                      |          |                       |   | 177,100                    |  |                    |  |  |              |           |   |  |   | 177,100  
|Inventories                                                |  |                      |          |                       |   | 330,487                    |  |                    |  |  |              |           |   |  |   | 330,487  
|Deferred taxes and prepaid expenses                        |  |                      | 6,108     |                       |   | 45,235                     |  |                    |  |  |              |           |   |  |   | 51,343   
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total current assets                                       |  |                      | 180,451   |                       |   | 560,420                    |  |                    |  |  |              |           |   |  |   | 740,871  
|Goodwill                                                   |  |                      |          |                       |   | 146,474                    |  |                    |  |  |              |           |   |  |   | 146,474  
|Real estate and investments                                |  |                      |          |                       |   | 106,239                    |  |                    |  |  |              |           |   |  |   | 106,239  
|Deferred charges and intangibles                           |  |                      | 18,475    |                       |   | 15,677                     |  |                    |  |  |              |           |   |  |   | 34,152   
|Deferred income taxes                                      |  |                      | 34,017    |                       |   |                           |  |                    |  |  |              | (34,017    | ) |  |   |         
|Investment in subsidiaries                                 |  |                      | 1,178,266 |                       |   |                           |  |                    |  |  |              | (1,178,266 | ) |  |   |         
|Intercompany receivables                                   |  |                      | 830,219   |                       |   | 540,112                    |  |                    |  |  |              | (1,370,331 | ) |  |   |         
|Property, plant and equipment - net                        |  |                      |          |                       |   | 1,043,485                  |  |                    |  |  |              | (508       | ) |  |   | 1,042,977
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total assets                                               |  | $                    | 2,241,428 |                       | $ | 2,412,407                  |  | $                  |  |  | $            | (2,583,122 | ) |  | $ | 2,070,713
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Accounts payable                                           |  | $                    | 42        |                       | $ | 112,503                    |  | $                  |  |  | $            |           |   |  | $ | 112,545  
|Accrued interest, wages and other items                    |  |                      | 28,319    |                       |   | 58,702                     |  |                    |  |  |              |           |   |  |   | 87,021   
|Current portion of long-term debt                          |  |                      | 680       |                       |   | 14                         |  |                    |  |  |              |           |   |  |   | 694      
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total current liabilities                                  |  |                      | 29,041    |                       |   | 171,219                    |  |                    |  |  |              |           |   |  |   | 200,260  
|Intercompany payables                                      |  |                      | 540,112   |                       |   | 830,219                    |  |                    |  |  |              | (1,370,331 | ) |  |   |         
|Long-term debt                                             |  |                      | 604,812   |                       |   | 383                        |  |                    |  |  |              |           |   |  |   | 605,195  
|Convertible subordinated debentures                        |  |                      | 199,937   |                       |   |                           |  |                    |  |  |              |           |   |  |   | 199,937  
|Deferred income taxes and other credits                    |  |                      | 6,548     |                       |   | 236,448                    |  |                    |  |  |              | (34,171    | ) |  |   | 208,825  
|Shareholders equity                                       |  |                      | 860,978   |                       |   | 1,174,138                  |  |                    |  |  |              | (1,178,620 | ) |  |   | 856,496  
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total liabilities and shareholders equity                 |  | $                    | 2,241,428 |                       | $ | 2,412,407                  |  | $                  |  |  | $            | (2,583,122 | ) |  | $ | 2,070,713
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|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  
|Inventories                                                |  |                      |          |                       |   | 266,533                    |  |                    |  |  |              |           |   |  |   | 266,533  
|Deferred taxes and prepaid expenses                        |  |                      | 37        |                       |   | 34,917                     |  |                    |  |  |              |           |   |  |   | 34,954   
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total current assets                                       |  |                      | 134,850   |                       |   | 519,800                    |  |                    |  |  |              |           |   |  |   | 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                                 |  |                      | 1,083,377 |                       |   |                           |  |                    |  |  |              | (1,083,377 | ) |  |   |         
|Intercompany receivables                                   |  |                      | 765,806   |                       |   | 429,398                    |  |                    |  |  |              | (1,195,204 | ) |  |   |         
|Property, plant and equipment - net                        |  |                      |          |                       |   | 1,064,157                  |  |                    |  |  |              | (508       | ) |  |   | 1,063,649
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total assets                                               |  | $                    | 2,037,773 |                       | $ | 2,217,502                  |  | $                  |  |  | $            | (2,311,142 | ) |  | $ | 1,944,133
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Accounts payable                                           |  | $                    | 35        |                       | $ | 108,522                    |  | $                  |  |  | $            |           |   |  | $ | 108,557  
|Accrued interest, wages and other items                    |  |                      | 29,088    |                       |   | 49,611                     |  |                    |  |  |              |           |   |  |   | 78,699   
|Current portion of long-term debt                          |  |                      | 680       |                       |   | 19                         |  |                    |  |  |              |           |   |  |   | 699      
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total current liabilities                                  |  |                      | 29,803    |                       |   | 158,152                    |  |                    |  |  |              |           |   |  |   | 187,955  
|Intercompany payables                                      |  |                      | 429,398   |                       |   | 765,806                    |  |                    |  |  |              | (1,195,204 | ) |  |   |         
|Long-term debt                                             |  |                      | 598,027   |                       |   | 385                        |  |                    |  |  |              |           |   |  |   | 598,412  
|Convertible subordinated debentures                        |  |                      | 199,937   |                       |   |                           |  |                    |  |  |              |           |   |  |   | 199,937  
|Deferred income taxes and other credits                    |  |                      | 14,142    |                       |   | 213,910                    |  |                    |  |  |              | (32,207    | ) |  |   | 195,845  
|Shareholders equity                                       |  |                      | 766,466   |                       |   | 1,079,249                  |  |                    |  |  |              | (1,083,731 | ) |  |   | 761,984  
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          
|Total liabilities and shareholders equity                 |  | $                    | 2,037,773 |                       | $ | 2,217,502                  |  | $                  |  |  | $            | (2,311,142 | ) |  | $ | 1,944,133
|                                                           |  |                      |           |                       |   |                            |  |                    |   |  |              |            |   |  |   |          



- 17 -



---

##### Table of Contents

|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | ------------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|In thousands                                                                             |  | TexasIndustries,Inc. |         |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  | EliminatingEntries |   |  | Consolidated |        
|Condensed consolidating statement of operations for three months ended November 30, 2004 |  |                      |         |   |                       |   |         |                           
|                                                                                         |  |                      |         |   |                      
|Net sales                                                                                |  | $                    |        |   |                       | $ | 443,717 |                            |  | $                  |  |  | $            |        |   |  | $ | 443,717 |  
|Costs and expenses (income)                                                              |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|Cost of products sold                                                                    |  |                      |        |   |                       |   | 366,087 |                            |  |                    |  |  |              |        |   |  |   | 366,087 |  
|Selling, general and administrative                                                      |  |                      | 832     |   |                       |   | 25,380  |                            |  |                    |  |  |              |        |   |  |   | 26,212  |  
|Interest                                                                                 |  |                      | 17,005  |   |                       |   | 885     |                            |  |                    |  |  |              | (873    | ) |  |   | 17,017  |  
|Loss on early retirement of debt                                                         |  |                      |        |   |                       |   |        |                            |  |                    |  |  |              |        |   |  |   |        |  
|Other income                                                                             |  |                      | (1,510  | ) |                       |   | (11,109 | )                          |  |                    |  |  |              | 873     |   |  |   | (11,746 | )
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | 16,327  |   |                       |   | 381,243 |                            |  |                    |  |  |              |        |   |  |   | 397,570 |  
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                                 |  |                      | (16,327 | ) |                       |   | 62,474  |                            |  |                    |  |  |              |        |   |  |   | 46,147  |  
|Income taxes (benefit)                                                                   |  |                      | (5,696  | ) |                       |   | 20,886  |                            |  |                    |  |  |              |        |   |  |   | 15,190  |  
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | (10,631 | ) |                       |   | 41,588  |                            |  |                    |  |  |              |        |   |  |   | 30,957  |  
|Accounting change - net of income taxes                                                  |  |                      |        |   |                       |   |        |                            |  |                    |  |  |              |        |   |  |   |        |  
|Equity in earnings (loss) of subsidiaries                                                |  |                      | 41,588  |   |                       |   |        |                            |  |                    |  |  |              | (41,588 | ) |  |   |        |  
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                    | 30,957  |   |                       | $ | 41,588  |                            |  | $                  |  |  | $            | (41,588 | ) |  | $ | 30,957  |  
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|Condensed consolidating statement of operations for three months ended November 30, 2003 |  |                      |         |   |                       |   |         |                           
|                                                                                         |  |                      |         |   |                      
|Net sales                                                                                |  | $                    |        |   |                       | $ | 368,559 |                            |  | $                  |  |  | $            |        |   |  | $ | 368,559 |  
|Costs and expenses (income)                                                              |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|Cost of products sold                                                                    |  |                      |        |   |                       |   | 333,849 |                            |  |                    |  |  |              |        |   |  |   | 333,849 |  
|Selling, general and administrative                                                      |  |                      | 1,766   |   |                       |   | 22,906  |                            |  |                    |  |  |              |        |   |  |   | 24,672  |  
|Interest                                                                                 |  |                      | 17,306  |   |                       |   | 1,698   |                            |  |                    |  |  |              | (872    | ) |  |   | 18,132  |  
|Loss on early retirement of debt                                                         |  |                      |        |   |                       |   |        |                            |  |                    |  |  |              |        |   |  |   |        |  
|Other income                                                                             |  |                      | (917    | ) |                       |   | (45     | )                          |  |                    |  |  |              | 872     |   |  |   | (90     | )
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | 18,155  |   |                       |   | 358,408 |                            |  |                    |  |  |              |        |   |  |   | 376,563 |  
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                                 |  |                      | (18,155 | ) |                       |   | 10,151  |                            |  |                    |  |  |              |        |   |  |   | (8,004  | )
|Income taxes (benefit)                                                                   |  |                      | (6,354  | ) |                       |   | 4,807   |                            |  |                    |  |  |              |        |   |  |   | (1,547  | )
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | (11,801 | ) |                       |   | 5,344   |                            |  |                    |  |  |              |        |   |  |   | (6,457  | )
|Accounting change - net of income taxes                                                  |  |                      |        |   |                       |   |        |                            |  |                    |  |  |              |        |   |  |   |        |  
|Equity in earnings (loss) of subsidiaries                                                |  |                      | 5,344   |   |                       |   |        |                            |  |                    |  |  |              | (5,344  | ) |  |   |        |  
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                    | (6,457  | ) |                       | $ | 5,344   |                            |  | $                  |  |  | $            | (5,344  | ) |  | $ | (6,457  | )
|                                                                                         |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |         |   |  |   |         |  



- 18 -



---

##### Table of Contents

|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|-------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |         |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  |   | EliminatingEntries |   |  | Consolidated |        
|Condensed consolidating statement of operations for six months ended November 30, 2004 |  |                      |         |   |                       |   |         |                            | 
|                                                                                       |  |                      |         |   |                      
|Net sales                                                                              |  | $                    |        |   |                       | $ | 943,571 |                            |  | $ |                   |   |  | $            |        |   |  | $ | 943,571 |  
|Costs and expenses (income)                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |        |   |                       |   | 772,055 |                            |  |   |                   |   |  |              |        |   |  |   | 772,055 |  
|Selling, general and administrative                                                    |  |                      | 1,151   |   |                       |   | 51,625  |                            |  |   |                   |   |  |              |        |   |  |   | 52,776  |  
|Interest                                                                               |  |                      | 33,941  |   |                       |   | 1,892   |                            |  |   |                   |   |  |              | (1,755  | ) |  |   | 34,078  |  
|Loss on early retirement of debt                                                       |  |                      |        |   |                       |   |        |                            |  |   |                   |   |  |              |        |   |  |   |        |  
|Other income                                                                           |  |                      | (2,739  | ) |                       |   | (14,307 | )                          |  |   |                   |   |  |              | 1,755   |   |  |   | (15,291 | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 32,353  |   |                       |   | 811,265 |                            |  |   |                   |   |  |              |        |   |  |   | 843,618 |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (32,353 | ) |                       |   | 132,306 |                            |  |   |                   |   |  |              |        |   |  |   | 99,953  |  
|Income taxes (benefit)                                                                 |  |                      | (11,305 | ) |                       |   | 44,418  |                            |  |   |                   |   |  |              |        |   |  |   | 33,113  |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (21,048 | ) |                       |   | 87,888  |                            |  |   |                   |   |  |              |        |   |  |   | 66,840  |  
|Accounting change - net of income taxes                                                |  |                      |        |   |                       |   |        |                            |  |   |                   |   |  |              |        |   |  |   |        |  
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 87,888  |   |                       |   |        |                            |  |   |                   |   |  |              | (87,888 | ) |  |   |        |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | 66,840  |   |                       | $ | 87,888  |                            |  | $ |                   |   |  | $            | (87,888 | ) |  | $ | 66,840  |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Condensed consolidating statement of operations for six months ended November 30, 2003 |  |                      |         |   |                       |   |         |                            | 
|                                                                                       |  |                      |         |   |                      
|Net sales                                                                              |  | $                    |        |   |                       | $ | 744,597 |                            |  | $ |                   |   |  | $            |        |   |  | $ | 744,597 |  
|Costs and expenses (income)                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |        |   |                       |   | 686,504 |                            |  |   |                   |   |  |              |        |   |  |   | 686,504 |  
|Selling, general and administrative                                                    |  |                      | 1,898   |   |                       |   | 48,341  |                            |  |   | 36                 |   |  |              |        |   |  |   | 50,275  |  
|Interest                                                                               |  |                      | 36,369  |   |                       |   | 3,507   |                            |  |   | 31                 |   |  |              | (1,984  | ) |  |   | 37,923  |  
|Loss on early retirement of debt                                                       |  |                      | 11,246  |   |                       |   |        |                            |  |   |                   |   |  |              |        |   |  |   | 11,246  |  
|Other income                                                                           |  |                      | (2,050  | ) |                       |   | (6,345  | )                          |  |   | (67                | ) |  |              | 2,176   |   |  |   | (6,286  | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 47,463  |   |                       |   | 732,007 |                            |  |   |                   |   |  |              | 192     |   |  |   | 779,662 |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (47,463 | ) |                       |   | 12,590  |                            |  |   |                   |   |  |              | (192    | ) |  |   | (35,065 | )
|Income taxes (benefit)                                                                 |  |                      | (16,612 | ) |                       |   | 2,705   |                            |  |   |                   |   |  |              | (67     | ) |  |   | (13,974 | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (30,851 | ) |                       |   | 9,885   |                            |  |   |                   |   |  |              | (125    | ) |  |   | (21,091 | )
|Accounting change - net of income taxes                                                |  |                      |        |   |                       |   | (1,071  | )                          |  |   |                   |   |  |              |        |   |  |   | (1,071  | )
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 8,689   |   |                       |   |        |                            |  |   |                   |   |  |              | (8,689  | ) |  |   |        |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | (22,162 | ) |                       | $ | 8,814   |                            |  | $ |                   |   |  | $            | (8,814  | ) |  | $ | (22,162 | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  



- 19 -



---

##### Table of Contents

|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | -------------------- | -------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------------ | - | ------------ | - | - |  | - | -------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |          |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  |   | EliminatingEntries |   | Consolidated |  
|Condensed consolidating statement of cash flows for six months ended November 30, 2004 |  |                      |          |   |                       |   |         |                           
|                                                                                       |  |                      |          |   |                      
|Net cash provided (used) by operations                                                 |  | $                    | 20,559   |   |                       | $ | 87,839  |                            |  | $ |                   |   |              | $ |  |  | $ | 108,398  |  
|                                                                                       |  |                      |          |   |                      
|Investing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Capital expenditures                                                                   |  |                      |         |   |                       |   | (27,120 | )                          |  |   |                   |   |              |   |  |  |   | (27,120  | )
|Proceeds from disposal of assets                                                       |  |                      |         |   |                       |   | 2,674   |                            |  |   |                   |   |              |   |  |  |   | 2,674    |  
|Investments in life insurance contracts                                                |  |                      |         |   |                       |   | (57,761 | )                          |  |   |                   |   |              |   |  |  |   | (57,761  | )
|Other - net                                                                            |  |                      | (500     | ) |                       |   | (4,841  | )                          |  |   |                   |   |              |   |  |  |   | (5,341   | )
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash used by investing                                                             |  |                      | (500     | ) |                       |   | (87,048 | )                          |  |   |                   |   |              |   |  |  |   | (87,548  | )
|                                                                                       |  |                      |          |   |                      
|Financing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Long-term borrowings                                                                   |  |                      |         |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   |         |  
|Debt retirements                                                                       |  |                      | (340     | ) |                       |   | (8      | )                          |  |   |                   |   |              |   |  |  |   | (348     | )
|Debt issuance costs                                                                    |  |                      |         |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   |         |  
|Debt retirement costs                                                                  |  |                      |         |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   |         |  
|Proceeds from stock option exercises                                                   |  |                      | 23,116   |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | 23,116   |  
|Common dividends paid                                                                  |  |                      | (3,244   | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (3,244   | )
|Other - net                                                                            |  |                      | (61      | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (61      | )
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash provided (used) by financing                                                  |  |                      | 19,471   |   |                       |   | (8      | )                          |  |   |                   |   |              |   |  |  |   | 19,463   |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents                                       |  |                      | 39,530   |   |                       |   | 783     |                            |  |   |                   |   |              |   |  |  |   | 40,313   |  
|                                                                                       |  |                      |          |   |                      
|Cash and cash equivalents at beginning of period                                       |  |                      | 134,813  |   |                       |   | 6,815   |                            |  |   |                   |   |              |   |  |  |   | 141,628  |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                                             |  | $                    | 174,343  |   |                       | $ | 7,598   |                            |  | $ |                   |   |              | $ |  |  | $ | 181,941  |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Condensed consolidating statement of cash flows for six months ended November 30, 2003 |  |                      |          |   |                       |   |         |                           
|                                                                                       |  |                      |          |   |                      
|Net cash provided (used) by operations                                                 |  | $                    | (70,060  | ) |                       | $ | 15,688  |                            |  | $ | (5                 | ) |              | $ |  |  | $ | (54,377  | )
|                                                                                       |  |                      |          |   |                      
|Investing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Capital expenditures                                                                   |  |                      |         |   |                       |   | (15,953 | )                          |  |   |                   |   |              |   |  |  |   | (15,953  | )
|Proceeds from disposal of assets                                                       |  |                      |         |   |                       |   | 2,481   |                            |  |   |                   |   |              |   |  |  |   | 2,481    |  
|Investments in life insurance contracts                                                |  |                      |         |   |                       |   | 13      |                            |  |   |                   |   |              |   |  |  |   | 13       |  
|Other - net                                                                            |  |                      |         |   |                       |   | (1,664  | )                          |  |   |                   |   |              |   |  |  |   | (1,664   | )
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash used by investing                                                             |  |                      |         |   |                       |   | (15,123 | )                          |  |   |                   |   |              |   |  |  |   | (15,123  | )
|                                                                                       |  |                      |          |   |                      
|Financing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Long-term borrowings                                                                   |  |                      | 718,097  |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | 718,097  |  
|Debt retirements                                                                       |  |                      | (591,937 | ) |                       |   | (32     | )                          |  |   |                   |   |              |   |  |  |   | (591,969 | )
|Debt issuance costs                                                                    |  |                      | (16,016  | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (16,016  | )
|Debt retirement costs                                                                  |  |                      | (8,505   | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (8,505   | )
|Proceeds from stock option exercises                                                   |  |                      | 27       |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | 27       |  
|Common dividends paid                                                                  |  |                      | (3,162   | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (3,162   | )
|Other - net                                                                            |  |                      | (26      | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (26      | )
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash provided (used) by financing                                                  |  |                      | 98,478   |   |                       |   | (32     | )                          |  |   |                   |   |              |   |  |  |   | 98,446   |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents                                       |  |                      | 28,418   |   |                       |   | 533     |                            |  |   | (5                 | ) |              |   |  |  |   | 28,946   |  
|                                                                                       |  |                      |          |   |                      
|Cash and cash equivalents at beginning of period                                       |  |                      | 4,161    |   |                       |   | 2,038   |                            |  |   | 5                  |   |              |   |  |  |   | 6,204    |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                                             |  | $                    | 32,579   |   |                       | $ | 2,571   |                            |  | $ |                   |   |              | $ |  |  | $ | 35,150   |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  



- 20 -



---

##### 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 November 30, 2004, and the related condensed consolidated statements of operations for the three-month and six-month periods ended November 30, 2004 and 2003,
and the condensed consolidated statements of cash flows for the six-month periods ended November 30, 2004 and 2003. 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 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



December 16, 2004



- 21 -



---

##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Comparison of operations and financial condition for the three-month and
six-month periods ended November 30, 2004 to the three-month and six-month periods ended November 30, 2003.



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 November 30, |         | Six months ended November 30,
|In thousands                |  | 2004                            |         | 2003                          |   | 2004    |  | 2003
|TOTAL SALES                 |  |                                 |         |                               |   |         |  |      |         |  |   |        
|Cement                      |  | $                               | 95,879  |                               | $ | 89,538  |  | $    | 200,236 |  | $ | 180,423
|Ready-mix                   |  |                                 | 55,225  |                               |   | 55,228  |  |      | 109,744 |  |   | 107,653
|Stone, sand & gravel        |  |                                 | 30,596  |                               |   | 30,884  |  |      | 63,120  |  |   | 63,089 
|Structural mills            |  |                                 | 175,195 |                               |   | 120,436 |  |      | 382,314 |  |   | 248,915
|Bar mill                    |  |                                 | 53,820  |                               |   | 36,552  |  |      | 116,441 |  |   | 69,698 
|                            |  |                                 |         |                              
|UNITS SHIPPED               |  |                                 |         |                               |   |         |  |      |         |  |   |        
|Cement (tons)               |  |                                 | 1,299   |                               |   | 1,332   |  |      | 2,748   |  |   | 2,655  
|Ready-mix (cubic yards)     |  |                                 | 929     |                               |   | 958     |  |      | 1,868   |  |   | 1,863  
|Stone, sand & gravel (tons) |  |                                 | 5,465   |                               |   | 5,767   |  |      | 11,295  |  |   | 11,650 
|Structural mills (tons)     |  |                                 | 308     |                               |   | 363     |  |      | 695     |  |   | 757    
|Bar mill (tons)             |  |                                 | 81      |                               |   | 106     |  |      | 187     |  |   | 205    
|                            |  |                                 |         |                              
|NET SALES                   |  |                                 |         |                               |   |         |  |      |         |  |   |        
|Cement                      |  | $                               | 79,932  |                               | $ | 74,867  |  | $    | 168,867 |  | $ | 150,772
|Ready-mix                   |  |                                 | 55,166  |                               |   | 55,073  |  |      | 109,630 |  |   | 107,429
|Stone, sand & gravel        |  |                                 | 21,822  |                               |   | 22,325  |  |      | 45,904  |  |   | 46,407 
|Other products              |  |                                 | 21,234  |                               |   | 25,622  |  |      | 45,699  |  |   | 54,346 
|Delivery fees               |  |                                 | 16,444  |                               |   | 14,521  |  |      | 33,571  |  |   | 29,826 
|                            |  |                                 |         |                               |   |         |  |      |         |  |   |        
|TOTAL CAC                   |  |                                 | 194,598 |                               |   | 192,408 |  |      | 403,671 |  |   | 388,780
|                            |  |                                 |         |                              
|Structural mills            |  |                                 | 175,195 |                               |   | 120,436 |  |      | 382,314 |  |   | 248,915
|Bar mill                    |  |                                 | 53,820  |                               |   | 36,552  |  |      | 116,441 |  |   | 69,698 
|Other products              |  |                                 | 8,156   |                               |   | 6,281   |  |      | 15,169  |  |   | 10,964 
|Delivery fees               |  |                                 | 11,948  |                               |   | 12,882  |  |      | 25,976  |  |   | 26,240 
|                            |  |                                 |         |                               |   |         |  |      |         |  |   |        
|TOTAL STEEL                 |  |                                 | 249,119 |                               |   | 176,151 |  |      | 539,900 |  |   | 355,817
|                            |  |                                 |         |                               |   |         |  |      |         |  |   |        
|TOTAL NET SALES             |  | $                               | 443,717 |                               | $ | 368,559 |  | $    | 943,571 |  | $ | 744,597
|                            |  |                                 |         |                               |   |         |  |      |         |  |   |        



- 22 -



---

##### Table of Contents

|                                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------- |  | ------------------------------- | ------- | - | ----------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                        |  | Three months ended November 30, |         |   | Six months ended November 30, |  
|In thousands                                            |  | 2004                            |         |   | 2003                          |   |         | 2004 |  |   | 2003    |  
|CAC OPERATIONS                                          |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                            |  | $                               | 39,373  |   |                               | $ | 46,383  |      |  | $ | 81,692  |   |  | $ | 87,583  |  
|Less: Depreciation, depletion & amortization            |  |                                 | 11,107  |   |                               |   | 11,439  |      |  |   | 22,154  |   |  |   | 22,912  |  
|Selling, general & administrative                       |  |                                 | 11,872  |   |                               |   | 11,435  |      |  |   | 24,461  |   |  |   | 22,732  |  
|Other income                                            |  |                                 | (6,925  | ) |                               |   | (197    | )    |  |   | (9,548  | ) |  |   | (1,968  | )
|                                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|OPERATING PROFIT                                        |  |                                 | 23,319  |   |                               |   | 23,706  |      |  |   | 44,625  |   |  |   | 43,907  |  
|                                                        |  |                                 |         |  
|STEEL OPERATIONS                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                            |  |                                 | 61,285  |   |                               |   | 12,315  |      |  |   | 135,893 |   |  |   | 17,924  |  
|Less: Depreciation & amortization                       |  |                                 | 12,104  |   |                               |   | 12,769  |      |  |   | 24,281  |   |  |   | 24,947  |  
|Selling, general & administrative                       |  |                                 | 5,525   |   |                               |   | 5,572   |      |  |   | 12,532  |   |  |   | 13,038  |  
|Other income                                            |  |                                 | (1,318  | ) |                               |   | (200    | )    |  |   | (1,822  | ) |  |   | (4,141  | )
|                                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|OPERATING PROFIT (LOSS)                                 |  |                                 | 44,974  |   |                               |   | (5,826  | )    |  |   | 100,902 |   |  |   | (15,920 | )
|                                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|TOTAL OPERATING PROFIT                                  |  |                                 | 68,293  |   |                               |   | 17,880  |      |  |   | 145,527 |   |  |   | 27,987  |  
|                                                        |  |                                 |         |  
|CORPORATE RESOURCES                                     |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Other income                                            |  |                                 | 3,503   |   |                               |   | (307    | )    |  |   | 3,921   |   |  |   | 177     |  
|Less: Depreciation & amortization                       |  |                                 | 447     |   |                               |   | 474     |      |  |   | 898     |   |  |   | 950     |  
|Selling, general & administrative                       |  |                                 | 8,185   |   |                               |   | 6,971   |      |  |   | 14,519  |   |  |   | 13,110  |  
|                                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|                                                        |  |                                 | (5,129  | ) |                               |   | (7,752  | )    |  |   | (11,496 | ) |  |   | (13,883 | )
|                                                        |  |                                 |         |  
|INTEREST EXPENSE                                        |  |                                 | (17,017 | ) |                               |   | (18,132 | )    |  |   | (34,078 | ) |  |   | (37,923 | )
|                                                        |  |                                 |         |  
|LOSS ON EARLY RETIREMENT OF DEBT                        |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   | (11,246 | )
|                                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGE |  | $                               | 46,147  |   |                               | $ | (8,004  | )    |  | $ | 99,953  |   |  | $ | (35,065 | )
|                                                        |  |                                 |         |   |                               |   |         |      |  |   |         |   |  |   |         |  



RESULTS OF OPERATIONS



CAC Operations



CAC operating profit at $23.3 million in the current quarter and $44.6
million in the current six-month period was comparable to the prior year periods. The impact of unseasonably wet weather on construction activity throughout the Companys markets and unscheduled downtime at the Companys north Texas cement
plant reduced shipments in the current quarter. The sale of emissions credits associated with the Companys expanded shale and clay operations in south Texas contributed $6.2 million to other income. Overall demand remains solid in the
Companys Texas and California markets.



Net Sales.
CAC sales at $194.6 million in the current quarter increased $2.2 million from the prior year period. Total cement sales increased $6.3 million on 10% higher average trade prices and 2% lower shipments. Ready-mix sales were comparable to the prior
year period on 3% higher average trade prices and 3% lower volume. Aggregate sales declined $300,000 on 2% higher average trade prices and 5% lower shipments.



CAC sales at $403.7 million in the current six-month period increased $14.9 million from the prior year period. Total cement sales increased $19.8
million on 7% higher average trade prices and 4% higher shipments. Ready-mix average trade prices and volumes were comparable to the prior year period. Aggregate sales were comparable to the prior year period on 3% higher average trade prices and 3%
lower shipments.



- 23 -



---

##### Table of Contents

Operating Costs. CAC cost of products sold at $166.1 million in the current quarter, including
depreciation, depletion and amortization, increased $8.9 million from the prior year period. Cost of products sold at $343.8 million in the current six-month period increased $20.1 million. Higher maintenance and energy costs impacted cement unit
costs.



Selling, general and administrative expense at $12.1
million in the current quarter, including depreciation and amortization, increased $400,000 from the prior year period. Selling, general and administrative expense at $24.8 million in the current six-month period increased $1.6 million from the
prior year period. Higher incentive compensation and general expenses contributed to the increase.



Other income in the current periods includes $6.2 million from the sale of emissions credits.



Steel Operations



Steel operating profit at $45.0 million in the current quarter increased $50.8 million from the prior year period. Operating
profit at $100.9 million in the current six-month period increased $116.8 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. The scheduled shutdown to refurbish the Steel production facilities and service centers seeking to reduce their calendar year-end inventories reduced shipments in the current quarter.



Net Sales. Steel sales at $249.1 million in the current
quarter increased $73.0 million from the prior year period. Structural steel sales increased $54.8 million on 71% higher average realized prices and 15% lower shipments. Bar mill sales increased $17.3 million on 94% higher average realized prices
and 24% lower shipments.



Steel sales at $539.9 million in the
current six-month period increased $184.1 million from the prior year period. Structural steel sales increased $133.4 million on 67% higher average realized prices and 8% lower shipments. Bar mill sales increased $46.7 million on 83% higher average
realized prices and 9% lower shipments.



Operating
Costs. Steel cost of products sold at $199.9 million in the current quarter, including depreciation and amortization, increased $23.3 million from the prior year period. Cost of products sold at $428.3 million in the current six-month period
increased $65.4 million from the prior year period. Higher raw material costs have increased unit costs. While during last year, the Company has experienced unprecedented increases in the cost of steel scrap, the principal raw material used in its
steel production, scrap cost increases have begun to moderate.



Selling, general and administration expense at $5.5 million in the current quarter was comparable to the prior year period. Selling, general and administrative expense at $12.5 million in the current six-month period decreased $500,000 from
the prior year period as higher incentive compensation expense was offset by lower bad debt and general expenses.



Other income in the prior year six-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 $8.6 million in the current
quarter, including depreciation and amortization, increased $1.2 million from the prior year period. Selling, general and administrative expense at $15.4 million in the current six-month period increased $1.4 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 periods includes increased real estate and interest income.



Interest Expense



Interest expense at $34.1 million in the current six-month period decreased $3.8 million from the prior year period primarily as a result of the
Companys interest rate swaps on $300 million of the senior notes and the repayment of life insurance contract distributions.



- 24 -



---

##### Table of Contents

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 six-month period as a
result of the June 2003 refinancing.



Income Taxes



The Companys effective tax rate is estimated at 33.1% compared to
39.6% 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.



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 six-month period.



LIQUIDITY AND CAPITAL RESOURCES



In addition to cash on hand at November 30, 2004 of $181.9 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 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 November 30, 2004; however, $24.7 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 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 interest, 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.



Investments in Life Insurance Contracts.During the August 2004
quarter distributions from its 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. In addition, 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.



- 25 -



---

##### Table of Contents

We expect cash on hand, 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.



Cash Flows



Net cash provided by operations was $108.4 million in the current six-month period, compared to $54.4 million used in the
prior year period. Operating cash flows excluding repurchases of trade receivables increased $47.3 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 $68.5 million as a result of higher scrap costs and the normal seasonal increase in raw material inventories. Steel prepaid expenses increased $10.2 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 $87.5 million in the current six-month period, compared to $15.1 million 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 $27.1 million, up $11.2 million from the prior year
period. The Company increased its investments in life insurance contracts $57.8 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 $19.5 million in the current six-month period, compared to $98.4 million in
the prior year period. Proceeds from stock option exercises increased $23.1 million from the prior year period. 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 and the information currently available to it, 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.



The Company has entered into interest rate swap agreements on $300 million of
the underlying fixed rate debt. The swaps change 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, is expected to moderate financing costs. The swaps are sensitive to interest rate changes. For example, if short-term interest rates increase (decrease) by one percentage point, annual pretax interest expense would increase
(decrease) by $3 million.



- 26 -



---

##### Table of Contents

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 Prouncement



On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123
(revised 2004), Share-Based Payment. SFAS No. 123(R) would require the Company to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial statements. In
addition, the adoption of SFAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. SFAS No. 123(R) is effective
beginning in the quarter ending November 30, 2005. The effect of the adoption of SFAS No. 123(R) is expected to be comparable to that being disclosed on a pro forma basis as a result of applying the current fair value recognition provisions of SFAS
No. 123. See Notes to Consolidated Financial Statements entitled Stock-based Compensation on pages 9 and 10.



Subsequent Event



On December 14, 2004, the Companys Board of Directors approved a plan to spin-off its wholly-owned steel business. While details of the spin-off
have not been finalized the transaction is expected to take the form of a tax-free stock dividend to the Companys shareholders. 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 in the August 2005 quarter.



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, 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.



- 27 -



---

##### Table of Contents

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 repurchases 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. The following
table presents information with respect to such repurchases which occurred during the three-month period ended November 30, 2004.



|                                       |  |                                     |  |                                  |  |                                                                                    |  |                                                                                
|-------------------------------------- |  | ----------------------------------- |  | -------------------------------- |  | ---------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------
|Period                                 |  | (a) TotalNumber of Shares Purchased |  | (b) Average Price Paid per Share |  | (c) Total Number of Shares Purchasedas Part of PubliclyAnnounced Plans or Programs |  | (d) Maximum Numberof Shares that MayYet Be PurchasedUnder the Plans or Programs
|September 1, 2004  September 30, 2004 |  |                                    |  |                                 |  | N/A                                                                                |  | N/A                                                                            
|October 1, 2004 - October 31, 2004     |  |                                    |  |                                 |  | N/A                                                                                |  | N/A                                                                            
|November 1, 2004  November 30, 2004   |  | 15,800                              |  | 57.365                           |  | N/A                                                                                |  | N/A                                                                            
|                                       |  |                                     |  |                                  |  |                                                                                    |  |                                                                                
|Total                                  |  | 15,800                              |  | 57.365                           |  | N/A                                                                                |  | N/A                                                                            
|                                       |  |                                     |  |                                  |  |                                                                                    |  |                                                                                



- 28 -



---

##### Table of Contents

Unregistered Sales of Equity Securities



Under a deferred compensation agreement, annual and meeting fees of Directors may be deferred in whole or in part at the
election of the Director. Compensation so deferred is denominated in shares of the Companys Common Stock determined by reference to the average market price during the thirty (30) trading days prior to the date of the agreement. Dividends are
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. The table below describes unregistered shares of Common Stock issued pursuant
to such deferred compensation agreements during the three-month period ended November 30, 2004.



Beginning in January 1997, each non-employee Director received an annual grant of 500 restricted shares of unregistered Common Stock. Beginning in January
1998, 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 November 30,
2004, 23,500 restricted shares of unregistered Common Stock issued to continuing Directors were being held by the Company. The table below describes unregistered shares of Common Stock delivered to directors who retired from the Board of Directors
during the three-month period ended November 30, 2004.



|                             |  |                         |  |                                  |         |   |             |                     |                |         
|---------------------------- |  | ----------------------- |  | -------------------------------- | ------- | - | ----------- | ------------------- | -------------- | --------
|Name                         |  | Number of Shares Issued |  | Aggregate Consideration Received |         |   | Date Issued |                     | Date Delivered
|Deferred compensation shares |  |                         |  |                                  |         |   |             |                     |                |         
|Gerald R. Heffernan          |  | 29,710                  |  | $                                | 716,798 | * |             | 10/28/04            |                | 11/02/04
|David A. Reed                |  | 1,381                   |  |                                  | 34,823  | * |             | 10/28/04            |                | 11/02/04
|Restricted shares            |  |                         |  |                                  |         |   |             |                     |                |         
|Gerald R. Heffernan          |  | 18,500                  |  |                                  | N/A     |   |             | 01/02/97 - 01/15/04 |                | 11/02/04
|David A. Reed                |  | 2,000                   |  |                                  | N/A     |   |             | 01/02/01 - 01/02/04 |                | 11/02/04

---

|* | The Company received no cash consideration. The consideration received is equal to the amount of directors fees deferred and dividends paid.
|- | --------------------------------------------------------------------------------------------------------------------------------------------



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



Item 4. Submission of Matters to a Vote of Security Holders



The following provides information concerning each matter submitted to a vote at the Annual Meeting of the shareholders on October 19, 2004.



Proposal No. 1.Shareholders elected each of the following persons as a director of the Company for a term of office
expiring in 2007.



|                 |  |                   |  |                |  |                       
|---------------- |  | ----------------- |  | -------------- |  | ----------------------
|Name             |  | Affirmative Votes |  | Negative Votes |  | Abstained or Non-voted
|Mel G. Brekhus   |  | 17,979,951        |  | 2,064,454      |  | 1,302,136             
|Robert D. Rogers |  | 17,973,047        |  | 2,071,358      |  | 1,302,136             
|Ian Wachtmeister |  | 17,549,854        |  | 2,494,551      |  | 1,302,136             



Terms of office expire
for the continuing directors Robert Alpert, Eugenio Clariond and Elizabeth C. Williams in 2005 and for the continuing directors Gordon E. Forward, James M. Hoak, Jr., Keith W. Hughes and Henry H. Mauz, Jr. in 2006.



- 29 -



---

##### Table of Contents

Proposal No. 2. Shareholders approved the adoption of the Texas Industries, Inc. 2004 Omnibus
Equity Compensation Plan with 10,215, 908 affirmative votes, 8,268,469 negative votes and 2,862,164 votes abstaining or non-voted.



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.



- 30 -



---

##### 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.                                        
|                | 
|January 7, 2005 |  | /s/ Richard M. Fowler                                         
|                |  | Richard M. Fowler                                             
|                |  | Executive Vice President - Finance and Chief Financial Officer
|                |  | (Principal Financial Officer)                                 
|                | 
|January 7, 2005 |  | /s/ James R. McCraw                                           
|                |  | James R. McCraw                                               
|                |  | Vice President  Accounting and Information Services          
|                |  | (Principal Accounting Officer)                                



- 31 -



---

##### Table of Contents

INDEX TO EXHIBITS



|         |  |                                                                  
|-------- |  | -----------------------------------------------------------------
|Exhibits |  |                                                                  
|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            



- 32 -