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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-Q



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(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, 2005



| ̈ | 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



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TEXAS INDUSTRIES, INC.

(Exact name of registrant as specified in the charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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 ̈



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



There were 23,075,845 shares of the Registrants Common Stock, $1.00 par value, outstanding as of January 3, 2006.



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##### Table of Contents

INDEX



TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                              |  |                                                                                                                          |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | --
|PART I. FINANCIAL INFORMATION |  | Page                                                                                                                    
|                              |  |                                                                                                                         
|Item 1.                       |  | Financial Statements                                                                                                     |  |   
|                              |  |                                                                                                                         
|                              |  | Consolidated Balance Sheets  November 30, 2005 and May 31, 2005                                                         |  | 3 
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Operations  three months and six months ended November 30, 2005 and November 30, 2004        |  | 4 
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Cash Flows  six months ended November 30, 2005 and November 30, 2004                         |  | 5 
|                              |  |                                                                                                                         
|                              |  | Notes to Consolidated Financial Statements                                                                               |  | 6 
|                              |  |                                                                                                                         
|                              |  | Report of Independent Registered Public Accounting Firm                                                                  |  | 26
|                              |  |                                                                                                                         
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 27
|                              |  |                                                                                                                         
|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                                                                                                  |  | 34
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Legal Proceedings                                                                                                        |  | 34
|                              |  |                                                                                                                         
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                              |  | 34
|                              |  |                                                                                                                         
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                      |  | 35
|                              |  |                                                                                                                         
|Item 6.                       |  | Exhibits                                                                                                                 |  | 35
|                              |  |                                                                                                                         
|SIGNATURES                    |  |                                                                                                                          |  |   



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##### Table of Contents

CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                     |  |                               |           |   |              |   |           |  
|---------------------------------------------------- |  | ----------------------------- | --------- | - | ------------ | - | --------- | -
|In thousands                                         |  | (Unaudited) November 30, 2005 |           |   | May 31, 2005 |  
|ASSETS                                               |  |                               |           |   |              |   |           |  
|CURRENT ASSETS                                       |  |                               |           |   |              |   |           |  
|Cash and cash equivalents                            |  | $                             | 133,287   |   |              | $ | 251,600   |  
|Short-term investments                               |  |                               | 24,527    |   |              |   |          |  
|Accounts receivable  net                            |  |                               | 105,329   |   |              |   | 117,363   |  
|Inventories                                          |  |                               | 90,986    |   |              |   | 83,291    |  
|Deferred income taxes and prepaid expenses           |  |                               | 29,295    |   |              |   | 28,754    |  
|                                                     |  |                               |           |   |              |   |           |  
|TOTAL CURRENT ASSETS                                 |  |                               | 383,424   |   |              |   | 481,008   |  
|                                                     |  |                              
|OTHER ASSETS                                         |  |                               |           |   |              |   |           |  
|Goodwill                                             |  |                               | 61,307    |   |              |   | 61,307    |  
|Real estate and investments                          |  |                               | 102,746   |   |              |   | 100,200   |  
|Deferred income taxes, intangibles and other charges |  |                               | 37,907    |   |              |   | 27,571    |  
|Net assets of discontinued operations                |  |                               |          |   |              |   | 836,100   |  
|                                                     |  |                               |           |   |              |   |           |  
|                                                     |  |                               | 201,960   |   |              |   | 1,025,178 |  
|PROPERTY, PLANT AND EQUIPMENT                        |  |                               |           |   |              |   |           |  
|Land and land improvements                           |  |                               | 130,687   |   |              |   | 131,911   |  
|Buildings                                            |  |                               | 45,659    |   |              |   | 45,847    |  
|Machinery and equipment                              |  |                               | 682,614   |   |              |   | 682,962   |  
|Construction in progress                             |  |                               | 41,756    |   |              |   | 22,096    |  
|                                                     |  |                               |           |   |              |   |           |  
|                                                     |  |                               | 900,716   |   |              |   | 882,816   |  
|Less depreciation and depletion                      |  |                               | 483,279   |   |              |   | 470,163   |  
|                                                     |  |                               |           |   |              |   |           |  
|                                                     |  |                               | 417,437   |   |              |   | 412,653   |  
|                                                     |  |                               |           |   |              |   |           |  
|                                                     |  | $                             | 1,002,821 |   |              | $ | 1,918,839 |  
|                                                     |  |                               |           |   |              |   |           |  
|                                                     |  |                              
|LIABILITIES AND SHAREHOLDERS EQUITY                 |  |                               |           |   |              |   |           |  
|CURRENT LIABILITIES                                  |  |                               |           |   |              |   |           |  
|Accounts payable                                     |  | $                             | 69,343    |   |              | $ | 58,022    |  
|Accrued interest, wages and other items              |  |                               | 45,644    |   |              |   | 49,449    |  
|Current portion of long-term debt                    |  |                               | 685       |   |              |   | 688       |  
|                                                     |  |                               |           |   |              |   |           |  
|TOTAL CURRENT LIABILITIES                            |  |                               | 115,672   |   |              |   | 108,159   |  
|                                                     |  |                              
|LONG-TERM DEBT                                       |  |                               | 251,848   |   |              |   | 603,126   |  
|                                                     |  |                              
|CONVERTIBLE SUBORDINATED DEBENTURES                  |  |                               | 199,937   |   |              |   | 199,937   |  
|                                                     |  |                              
|DEFERRED INCOME TAXES AND OTHER CREDITS              |  |                               | 58,551    |   |              |   | 80,050    |  
|                                                     |  |                              
|SHAREHOLDERS EQUITY                                 |  |                               |           |   |              |   |           |  
|Common stock, $1 par value                           |  |                               | 25,067    |   |              |   | 25,067    |  
|Additional paid-in capital                           |  |                               | 293,868   |   |              |   | 285,313   |  
|Retained earnings                                    |  |                               | 120,588   |   |              |   | 686,476   |  
|Cost of common stock in treasury                     |  |                               | (54,987   | ) |              |   | (61,566   | )
|Pension liability adjustment                         |  |                               | (7,723    | ) |              |   | (7,723    | )
|                                                     |  |                               |           |   |              |   |           |  
|                                                     |  |                               | 376,813   |   |              |   | 927,567   |  
|                                                     |  |                               |           |   |              |   |           |  
|                                                     |  | $                             | 1,002,821 |   |              | $ | 1,918,839 |  
|                                                     |  |                               |           |   |              |   |           |  



See
notes to consolidated financial statements.



3



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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                              |  | Three months endedNovember 30, |         |   | Six months endedNovember 30, |  
|In thousands except per share                                 |  | 2005                           |         |   | 2004                         |   |         | 2005 |  |   | 2004    |  
|                                                              |  |                                |         |  
|NET SALES                                                     |  | $                              | 220,764 |   |                              | $ | 194,598 |      |  | $ | 462,648 |   |  | $ | 403,671 |  
|                                                              |  |                                |         |  
|COSTS AND EXPENSES (INCOME)                                   |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Cost of products sold                                         |  |                                | 197,935 |   |                              |   | 166,149 |      |  |   | 392,156 |   |  |   | 343,767 |  
|Selling, general and administrative                           |  |                                | 14,832  |   |                              |   | 20,323  |      |  |   | 38,060  |   |  |   | 39,513  |  
|Interest                                                      |  |                                | 7,851   |   |                              |   | 5,044   |      |  |   | 17,115  |   |  |   | 10,174  |  
|Loss on debt retirements and spin-off charges                 |  |                                | 107     |   |                              |   |        |      |  |   | 112,391 |   |  |   |        |  
|Other income                                                  |  |                                | (8,161  | ) |                              |   | (10,421 | )    |  |   | (12,302 | ) |  |   | (13,462 | )
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|                                                              |  |                                | 212,564 |   |                              |   | 181,095 |      |  |   | 547,420 |   |  |   | 379,992 |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |  |                                | 8,200   |   |                              |   | 13,503  |      |  |   | (84,772 | ) |  |   | 23,679  |  
|                                                              |  |                                |         |  
|Income taxes (benefit)                                        |  |                                | 2,006   |   |                              |   | 3,761   |      |  |   | (30,942 | ) |  |   | 6,410   |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                      |  |                                | 6,194   |   |                              |   | 9,742   |      |  |   | (53,830 | ) |  |   | 17,269  |  
|                                                              |  |                                |         |  
|Income from discontinued operations  net of income taxes     |  |                                |        |   |                              |   | 21,215  |      |  |   | 8,691   |   |  |   | 49,571  |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|NET INCOME (LOSS)                                             |  | $                              | 6,194   |   |                              | $ | 30,957  |      |  | $ | (45,139 | ) |  | $ | 66,840  |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|                                                              |  |                                |         |  
|Basic earnings (loss) per share                               |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations                      |  | $                              | .27     |   |                              | $ | .45     |      |  | $ | (2.35   | ) |  | $ | .80     |  
|Income from discontinued operations                           |  |                                |        |   |                              |   | .97     |      |  |   | .38     |   |  |   | 2.30    |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                             |  | $                              | .27     |   |                              | $ | 1.42    |      |  | $ | (1.97   | ) |  | $ | 3.10    |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|                                                              |  |                                |         |  
|Diluted earnings (loss) per share                             |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations                      |  | $                              | .26     |   |                              | $ | .43     |      |  | $ | (2.35   | ) |  | $ | .77     |  
|Income from discontinued operations                           |  |                                |        |   |                              |   | .93     |      |  |   | .38     |   |  |   | 2.21    |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                             |  | $                              | .26     |   |                              | $ | 1.36    |      |  | $ | (1.97   | ) |  | $ | 2.98    |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|                                                              |  |                                |         |  
|Average shares outstanding                                    |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Basic                                                         |  |                                | 23,020  |   |                              |   | 21,804  |      |  |   | 22,921  |   |  |   | 21,580  |  
|Diluted                                                       |  |                                | 23,671  |   |                              |   | 22,688  |      |  |   | 22,921  |   |  |   | 22,396  |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|                                                              |  |                                |         |  
|Cash dividends per share                                      |  | $                              | .075    |   |                              | $ | .075    |      |  | $ | .15     |   |  | $ | .15     |  
|                                                              |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  



See
notes to consolidated financial statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                                                                                      |  |                              |          |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                                                      |  | Six months endedNovember 30, |         
|In thousands                                                                                                          |  | 2005                         |          |   | 2004 |  
|                                                                                                                      |  |                             
|CONTINUING OPERATIONS                                                                                                 |  |                              |          |   |      |   |         |  
|Operating Activities                                                                                                  |  |                              |          |   |      |   |         |  
|Income (loss) from continuing operations                                                                              |  | $                            | (53,830  | ) |      | $ | 17,269  |  
|Adjustments to reconcile income (loss) from continuing operations to cash provided by continuing operating activities |  |                              |          |   |      |   |         |  
|Loss on debt retirements                                                                                              |  |                              | 107,006  |   |      |   |        |  
|Gain on asset disposals                                                                                               |  |                              | (6,405   | ) |      |   | (2,490  | )
|Depreciation, depletion and amortization                                                                              |  |                              | 22,319   |   |      |   | 23,052  |  
|Deferred income taxes (benefit)                                                                                       |  |                              | (31,328  | ) |      |   | 16,628  |  
|Income tax benefit from stock option exercises                                                                        |  |                              |         |   |      |   | 7,000   |  
|Other  net                                                                                                           |  |                              | 1,259    |   |      |   | (266    | )
|Changes in operating assets and liabilities                                                                           |  |                              |          |   |      |   |         |  
|Accounts receivable  net                                                                                             |  |                              | 11,957   |   |      |   | 22,581  |  
|Inventories                                                                                                           |  |                              | (7,695   | ) |      |   | 4,498   |  
|Prepaid expenses                                                                                                      |  |                              | (812     | ) |      |   | 324     |  
|Accounts payable and accrued liabilities                                                                              |  |                              | 5,089    |   |      |   | 9,758   |  
|Other credits                                                                                                         |  |                              | 1,162    |   |      |   | (51     | )
|                                                                                                                      |  |                              |          |   |      |   |         |  
|Cash provided by continuing operating activities                                                                      |  |                              | 48,722   |   |      |   | 98,303  |  
|                                                                                                                      |  |                             
|Investing Activities                                                                                                  |  |                              |          |   |      |   |         |  
|Capital expenditures  expansions                                                                                     |  |                              | (12,019  | ) |      |   | (1,294  | )
|Capital expenditures  other                                                                                          |  |                              | (17,884  | ) |      |   | (15,604 | )
|Proceeds from asset disposals                                                                                         |  |                              | 10,429   |   |      |   | 2,607   |  
|Purchases of short-term investments                                                                                   |  |                              | (24,527  | ) |      |   | (500    | )
|Investments in life insurance contracts                                                                               |  |                              | (2,749   | ) |      |   | (57,342 | )
|Other  net                                                                                                           |  |                              | 237      |   |      |   | (4,841  | )
|                                                                                                                      |  |                              |          |   |      |   |         |  
|Cash used by continuing investing activities                                                                          |  |                              | (46,513  | ) |      |   | (76,974 | )
|                                                                                                                      |  |                             
|Financing Activities                                                                                                  |  |                              |          |   |      |   |         |  
|Long-term borrowings                                                                                                  |  |                              | 250,000  |   |      |   |        |  
|Debt retirements                                                                                                      |  |                              | (600,351 | ) |      |   | (348    | )
|Debt issuance costs                                                                                                   |  |                              | (7,298   | ) |      |   |        |  
|Debt retirement costs                                                                                                 |  |                              | (96,029  | ) |      |   |        |  
|Stock option exercises                                                                                                |  |                              | 5,880    |   |      |   | 23,116  |  
|Common dividends paid                                                                                                 |  |                              | (3,440   | ) |      |   | (3,244  | )
|Other  net                                                                                                           |  |                              |         |   |      |   | (61     | )
|                                                                                                                      |  |                              |          |   |      |   |         |  
|Cash provided (used) by continuing financing activities                                                               |  |                              | (451,238 | ) |      |   | 19,463  |  
|                                                                                                                      |  |                              |          |   |      |   |         |  
|Net Cash Provided (Used) by Continuing Operations                                                                     |  |                              | (449,029 | ) |      |   | 40,792  |  
|                                                                                                                      |  |                             
|DISCONTINUED OPERATIONS                                                                                               |  |                              |          |   |      |   |         |  
|Cash provided (used) by discontinued operating activities                                                             |  |                              | (7,114   | ) |      |   | 14,168  |  
|Cash used by discontinued investing activities                                                                        |  |                              | (2,757   | ) |      |   | (10,574 | )
|Cash provided by discontinued financing activities                                                                    |  |                              | 340,587  |   |      |   |        |  
|                                                                                                                      |  |                              |          |   |      |   |         |  
|Net Cash Provided by Discontinued Operations                                                                          |  |                              | 330,716  |   |      |   | 3,594   |  
|                                                                                                                      |  |                              |          |   |      |   |         |  
|Increase (Decrease) in Cash and Cash Equivalents                                                                      |  |                              | (118,313 | ) |      |   | 44,386  |  
|                                                                                                                      |  |                             
|Cash and Cash Equivalents at Beginning of Period                                                                      |  |                              | 251,600  |   |      |   | 133,053 |  
|                                                                                                                      |  |                              |          |   |      |   |         |  
|Cash and Cash Equivalents at End of Period                                                                            |  | $                            | 133,287  |   |      | $ | 177,439 |  
|                                                                                                                      |  |                              |          |   |      |   |         |  



See notes to consolidated financial
statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Texas Industries, Inc. and subsidiaries (unless the context indicates otherwise, collectively, the Company or TXI) is a leading supplier of construction materials. On July 29, 2005, the
Company completed the spin-off of its steel segment in the form of a pro-rata, tax-free dividend to the Companys shareholders of one share of Chaparral Steel Company (Chaparral) common stock for each share of the Companys
stock that was owned on July 20, 2005. The Companys continuing operations constitute a single business segment which 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.



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, 2005, are not necessarily indicative of the results that may be expected for the year
ended May 31, 2006. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys Current Report on Form 8-K dated November 15, 2005.



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. As a result of the spin-off of the steel segment the prior period
financial statements have been reclassified to present the steel segment as discontinued operations. See Discontinued Operations footnote on pages 18 and 19. Unless otherwise indicated, all amounts in the accompanying footnotes relate to
continuing operations.



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.



Short-Term Investments.The Companys short-term investments
consist of investment grade auction rate securities with an active resale market to ensure liquidity and the ability to be readily converted into cash to fund current operations, or satisfy other cash requirements as needed. These securities have
legal maturities ranging from 19 to 38 years, but have their interest rates reset at predetermined intervals, typically less than 30 days, through an auction process. These securities are expected to be sold within one year, regardless of their
legal maturity date. Accordingly, these securities have been classified as available-for-sale and as current assets in the consolidated balance sheet as of November 30, 2005. The auction rate securities are stated at cost which approximates
fair value. Net unrealized gains and losses, net of deferred taxes, are not significant due to the short duration between interest rate reset dates. Purchase and sale activity of short-term investments is presented as cash flows from investing
activities in the consolidated statements of cash flows.



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



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



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



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



Property, plant and equipment is recorded at cost. Provisions for depreciation are computed generally using the
straight-line method. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. Useful lives for the Companys primary operating facilities range from 10 to 25 years.
Maintenance and repairs are charged to expense as incurred.



Goodwill. Management tests goodwill for impairment at least annually by 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 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 having a carrying value of $61.3 million at both November 30, 2005 and May 31, 2005 resulted from the acquisition of Riverside Cement Company and is
identified with the Companys California cement operations. The fair value of the reporting unit exceeds its carrying value.



Real Estate and Investments.Surplus real estate and real estate acquired for development of high quality industrial, office or multi-use parks
totaled $8.2 million at November 30, 2005 and $9.2 million at May 31, 2005.



Investments are composed primarily of life insurance contracts purchased in connection with certain Company benefit plans. The contracts, recorded at their net cash surrender value, totaled $94.2 million (net of
distributions of $1.3 million) at November 30, 2005 and $89.4 million (net of distributions of $1.3 million) at May 31, 2005. During the six-month period ended November 30, 2004 distributed amounts totaling $51.2 million were repaid.



Deferred Charges and Intangibles.Deferred charges are
composed primarily of debt issuance costs that totaled $11.9 million at November 30, 2005 and $17.3 million at May 31, 2005. 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 7 to 15 years. Their carrying value, adjusted for write-offs, totaled $1.6 million (net of accumulated amortization of $2.8 million) at November 30, 2005 and $1.8 million
(net of accumulated amortization of $2.6 million) at May 31, 2005. Amortization expense incurred was $200,000 in both six-month periods ended November 30, 2005 and 2004. Estimated amortization expense for each of the five succeeding years
is $300,000 per year.



Other Credits.Other credits
totaled $57.8 million at both November 30, 2005 and May 31, 2005 are composed primarily of liabilities related to the Companys retirement plans, deferred compensation agreements and asset retirement obligations.



Asset Retirement Obligations.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, 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.



The Company incurs legal obligations
for asset retirement as part of its normal operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. 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.



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##### Table of Contents

Changes in the Companys asset retirement obligations are as follows:



|                               |  |                              |       |   |      |   |       |  
|------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                               |  | Six months endedNovember 30, |      
|In thousands                   |  | 2005                         |       |   | 2004 |  
|Balance at beginning of period |  | $                            | 4,655 |   |      | $ | 4,455 |  
|Additions                      |  |                              | 5     |   |      |   |      |  
|Accretion expense              |  |                              | 166   |   |      |   | 153   |  
|Settlements                    |  |                              | (399  | ) |      |   | (129  | )
|                               |  |                              |       |   |      |   |       |  
|Balance at end of period       |  | $                            | 4,427 |   |      | $ | 4,479 |  
|                               |  |                              |       |   |      |   |       |  



Pension Liability
Adjustment.The pension liability adjustment to shareholders equity of $7.7 million (net of tax of $4.2 million) at both November 30, 2005 and May 31, 2005 relates to a defined benefit retirement plan covering approximately 600
employees and retirees of the Companys California cement 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, 2005 and 2004.



Net Sales. The Company recognizes sales when title has transferred and products are delivered. All of the Companys sales were made in the United States during the periods presented. 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. The following is a summary of net sales by product.



|                       |  |                                |         |                              |   |         |  |      |         |  |   |        
|---------------------- |  | ------------------------------ | ------- | ---------------------------- | - | ------- |  | ---- | ------- |  | - | -------
|                       |  | Three-months endedNovember 30, |         | Six months endedNovember 30,
|In thousands           |  | 2005                           |         | 2004                         |   | 2005    |  | 2004
|Cement                 |  | $                              | 88,027  |                              | $ | 79,932  |  | $    | 180,632 |  | $ | 168,867
|Stone, sand and gravel |  |                                | 25,401  |                              |   | 21,822  |  |      | 57,445  |  |   | 45,904 
|Ready-mix              |  |                                | 66,467  |                              |   | 55,166  |  |      | 136,130 |  |   | 109,630
|Other products         |  |                                | 21,996  |                              |   | 21,234  |  |      | 48,674  |  |   | 45,699 
|Delivery fees          |  |                                | 18,873  |                              |   | 16,444  |  |      | 39,767  |  |   | 33,571 
|                       |  |                                |         |                              |   |         |  |      |         |  |   |        
|                       |  | $                              | 220,764 |                              | $ | 194,598 |  | $    | 462,648 |  | $ | 403,671
|                       |  |                                |         |                              |   |         |  |      |         |  |   |        



Other Income.Other income in the three-month period ended November 2005 includes a gain of $3.7 million resulting from the sale of certain investment assets. Other income in the three-month period ended November 2004 includes a gain of $6.2 million resulting
from the sale of emissions credits associated with the Companys expanded shale and clay operations in south Texas. Routine sales of surplus operating assets and real estate resulted in gains of $2.4 million and $2.6 million in the three-month
periods ended November 30, 2005 and 2004, respectively, and $4.6 million and $4.7 million in the six-month periods ended November 30, 2005 and 2004, respectively.



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 and vested shares
under the Companys former stock awards program. The deferred compensation is denominated in shares of the Companys common stock and issued in accordance with the terms of the agreement subsequent to retirement or separation from the
Company or with the approval of the Compensation Committee of the Board of Directors. The shares are considered contingently issuable because the director has an unconditional right to the shares to be issued. Vested stock award shares are issued in
the year in which the employee reaches age 60.



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##### Table of Contents

Diluted EPS adjusts income from continuing operations 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 endedNovember 30, |        | Six months endedNovember 30,
|In thousands except per share                                |  | 2005                           |        | 2004                         |   | 2005   |  |   | 2004   
|Basic earnings (loss)                                        |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Income (loss) from continuing operations                     |  | $                              | 6,194  |                              | $ | 9,742  |  | $ | (53,830 | ) |  | $ | 17,269
|Income from discontinued operations                          |  |                                |       |                              |   | 21,215 |  |   | 8,691   |   |  |   | 49,571
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Net income (loss)                                            |  | $                              | 6,194  |                              | $ | 30,957 |  | $ | (45,139 | ) |  | $ | 66,840
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|                                                             |  |                                |        |                             
|Diluted earnings (loss)                                      |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Income (loss) from continuing operations                     |  | $                              | 6,194  |                              | $ | 9,742  |  | $ | (53,830 | ) |  | $ | 17,269
|Interest on convertible subordinated debentures  net of tax |  |                                |       |                              |   |       |  |   |        |   |  |   |      
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Diluted income (loss) from continuing operations             |  |                                | 6,194  |                              |   | 9,742  |  |   | (53,830 | ) |  |   | 17,269
|Income from discontinued operations                          |  |                                |       |                              |   | 21,215 |  |   | 8,691   |   |  |   | 49,571
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Diluted income (loss)                                        |  | $                              | 6,194  |                              | $ | 30,957 |  | $ | (45,139 | ) |  | $ | 66,840
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|                                                             |  |                                |        |                             
|Shares                                                       |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Weighted-average shares outstanding                          |  |                                | 22,992 |                              |   | 21,753 |  |   | 22,891  |   |  |   | 21,521
|Contingently issuable shares                                 |  |                                | 28     |                              |   | 51     |  |   | 30      |   |  |   | 59    
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Basic weighted-average shares                                |  |                                | 23,020 |                              |   | 21,804 |  |   | 22,921  |   |  |   | 21,580
|                                                             |  |                                |        |                             
|Convertible subordinated debentures                          |  |                                |       |                              |   |       |  |   |        |   |  |   |      
|Stock option and award dilution                              |  |                                | 651    |                              |   | 884    |  |   |        |   |  |   | 816   
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Diluted weighted-average shares*                             |  |                                | 23,671 |                              |   | 22,688 |  |   | 22,921  |   |  |   | 22,396
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|                                                             |  |                                |        |                             
|Basic earnings (loss) per share                              |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Income (loss) from continuing operations                     |  | $                              | .27    |                              | $ | .45    |  | $ | (2.35   | ) |  | $ | .80   
|Income from discontinued operations                          |  |                                |       |                              |   | .97    |  |   | .38     |   |  |   | 2.30  
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Net income (loss)                                            |  | $                              | .27    |                              | $ | 1.42   |  | $ | (1.97   | ) |  | $ | 3.10  
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|                                                             |  |                                |        |                             
|Diluted earnings (loss) per share                            |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Income (loss) from continuing operations                     |  | $                              | .26    |                              | $ | .43    |  | $ | (2.35   | ) |  | $ | .77   
|Income from discontinued operations                          |  |                                |       |                              |   | .93    |  |   | .38     |   |  |   | 2.21  
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Net income (loss)                                            |  | $                              | .26    |                              | $ | 1.36   |  | $ | (1.97   | ) |  | $ | 2.98  
|                                                             |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|*       Shares excluded due to antidilutive effect           |  |                                |        |                              |   |        |  |   |         |   |  |   |       
|Convertible subordinated debentures                          |  |                                | 3,897  |                              |   | 2,888  |  |   | 3,897   |   |  |   | 2,888 
|Stock options and awards                                     |  |                                |       |                              |   |       |  |   | 790     |   |  |   | 259   



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 set at the fair
market value of the underlying common stock on the date the option is granted.



9



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##### Table of Contents

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 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. No options were granted in the six-month period ended November 30, 2005.



In addition to grants under its stock option plans, the Company has provided stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted
stock payments and a former stock awards program. Stock compensation expense related to these grants is included in the determination of net income as reported in the financial statements over the vesting periods of the related grants.



If the Company had applied the fair value recognition provision 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 endedNovember 30, |       |   | Six months endedNovember 30, |  
|In thousands except per share                                                                             |  | 2005                           |       |   | 2004                         |   |        | 2005 |  |   | 2004    |  
|                                                                                                          |  |                                |       |  
|Net income (loss)                                                                                         |  |                                |       |   |                              |   |        |      |  |   |         |   |  |   |        |  
|As reported                                                                                               |  | $                              | 6,194 |   |                              | $ | 30,957 |      |  | $ | (45,139 | ) |  | $ | 66,840 |  
|Plus: stock-based compensation included in the determination of net income (loss) as reported, net of tax |  |                                | (597  | ) |                              |   | 1,292  |      |  |   | 2,467   |   |  |   | 1,744  |  
|Less: fair value of stock-based compensation, net of tax                                                  |  |                                | 198   |   |                              |   | (635   | )    |  |   | (2,030  | ) |  |   | (1,897 | )
|                                                                                                          |  |                                |       |   |                              |   |        |      |  |   |         |   |  |   |        |  
|Pro forma                                                                                                 |  | $                              | 5,795 |   |                              | $ | 31,614 |      |  | $ | (44,702 | ) |  | $ | 66,687 |  
|                                                                                                          |  |                                |       |   |                              |   |        |      |  |   |         |   |  |   |        |  
|                                                                                                          |  |                                |       |  
|Basic earnings (loss) per share                                                                           |  |                                |       |   |                              |   |        |      |  |   |         |   |  |   |        |  
|As reported                                                                                               |  | $                              | .27   |   |                              | $ | 1.42   |      |  | $ | (1.97   | ) |  | $ | 3.10   |  
|Pro forma                                                                                                 |  |                                | .25   |   |                              |   | 1.45   |      |  |   | (1.95   | ) |  |   | 3.09   |  
|                                                                                                          |  |                                |       |  
|Diluted earnings (loss) per share                                                                         |  |                                |       |   |                              |   |        |      |  |   |         |   |  |   |        |  
|As reported                                                                                               |  | $                              | .26   |   |                              | $ | 1.36   |      |  | $ | (1.97   | ) |  | $ | 2.98   |  
|Pro forma                                                                                                 |  |                                | .24   |   |                              |   | 1.39   |      |  |   | (1.95   | ) |  |   | 2.98   |  



In December 2004, the
Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB Opinion
No. 25. Among other items, SFAS No. 123R eliminates the use of APB Opinion No. 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of
equity instruments, based on the grant date fair value of those awards, in the financial statements. The current effective date of SFAS No. 123R is the first fiscal year beginning after June 15, 2005, which will be the first quarter of the
Companys fiscal year ending May 31, 2007. We currently expect to adopt SFAS No. 123R effective June 1, 2006 using the modified prospective method. Under the modified prospective method, compensation cost is
recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested
awards granted prior to the effective date of SFAS No. 123R. Financial information for periods prior to the date of adoption of SFAS No. 123R would not be restated. The Company currently utilizes a standard option pricing model (i.e.,
Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, the standard also permits the use of a lattice model. The Company has not yet
determined which model it will use to measure the fair value of awards of equity instruments to employees upon the adoption of SFAS No. 123R.



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



SFAS No. 123R also requires
that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net
operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated because they depend on, among other things, when employees exercise stock options.



Accounting for Changes in Accounting Principles.In May 2005, the
Financial Accounting Standards Board issued SFAS No. 154, Accounting Changes and Error Corrections, which is effective for the Company for reporting changes in accounting principles beginning June 1, 2006. SFAS No. 154
modifies the reporting of a change in accounting principle to require retrospective application to prior periods financial statements, unless explicit transition provisions are provided for in new accounting pronouncements or existing
pronouncements that are in the transition phase when SFAS No. 154 becomes effective.



WORKING CAPITAL



Working capital totaled $267.8 million at November 30, 2005, compared to $372.8 million at May 31, 2005.



Accounts receivable are presented net of allowances for doubtful receivables
of $2.3 million at November 30, 2005 and $2.2 million at May 31, 2005. Provisions for bad debts charged to expense were $300,000 and $400,000 in the six-month periods ended November 30, 2005 and 2004, respectively. Uncollectible
accounts written off amounted to $200,000 and $2.0 million in the six-month periods ended November 30, 2005 and 2004, respectively.



Inventories consist of:



|                           |  |                  |        |             |   |       
|-------------------------- |  | ---------------- | ------ | ----------- | - | ------
|In thousands               |  | November 30,2005 |        | May 31,2005
|                           |  |                 
|Finished products          |  | $                | 7,265  |             | $ | 6,353 
|Work in process            |  |                  | 37,447 |             |   | 34,273
|Raw materials and supplies |  |                  | 46,274 |             |   | 42,665
|                           |  |                  |        |             |   |       
|                           |  | $                | 90,986 |             | $ | 83,291
|                           |  |                  |        |             |   |       



Inventories are stated
at cost (not in excess of market) with approximately 63% of inventories 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 $17.1 million at November 30, 2005 and $16.8 million at May 31, 2005.



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



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Accrued interest, wages and other items consist of:



|                         |  |                  |        |             |   |       
|------------------------ |  | ---------------- | ------ | ----------- | - | ------
|In thousands             |  | November 30,2005 |        | May 31,2005
|                         |  |                 
|Interest                 |  | $                | 9,351  |             | $ | 8,908 
|Employee compensation    |  |                  | 17,928 |             |   | 27,919
|Income taxes             |  |                  | 392    |             |   | 2,036 
|Property taxes and other |  |                  | 17,973 |             |   | 10,586
|                         |  |                  |        |             |   |       
|                         |  | $                | 45,644 |             | $ | 49,449
|                         |  |                  |        |             |   |       



LONG-TERM DEBT



Long-term debt is
comprised of the following:



|                                                                             |  |                  |         |             |   |        
|---------------------------------------------------------------------------- |  | ---------------- | ------- | ----------- | - | -------
|In thousands                                                                 |  | November 30,2005 |         | May 31,2005
|                                                                             |  |                 
|Senior secured revolving credit facility expiring in 2010                    |  | $                |        |             | $ |       
|Senior notes due 2013, interest rate 7.25%                                   |  |                  | 250,000 |             |   |       
|Pollution control bonds due through 2007, interest rate 5.25% (75% of prime) |  |                  | 2,155   |             |   | 2,495  
|Refinanced debt                                                              |  |                  |        |             |   | 600,932
|Other                                                                        |  |                  | 378     |             |   | 387    
|                                                                             |  |                  |         |             |   |        
|                                                                             |  |                  | 252,533 |             |   | 603,814
|Less current maturities                                                      |  |                  | 685     |             |   | 688    
|                                                                             |  |                  |         |             |   |        
|                                                                             |  | $                | 251,848 |             | $ | 603,126
|                                                                             |  |                  |         |             |   |        



Refinancing in
Connection with the Spin-off of Chaparral.In connection with the spin-off of Chaparral in July 2005 (see Discontinued Operations footnote on pages 18 and 19), the Company entered into new financing agreements and purchased the
outstanding $600 million aggregate principal amount of its 10.25% senior notes due 2011 (10.25% Senior Notes). On July 6, 2005, the Company issued $250 million aggregate principal amount of its new 7.25% senior notes due
July 15, 2013 (7.25% Senior Notes) and entered into a new senior secured revolving credit facility. In addition, Chaparral issued $300 million aggregate principal amount of its new senior notes due 2013 (Chaparral Senior
Notes) and entered into a separate new senior secured revolving credit facility. Chaparral used the net proceeds from its note offering and borrowings under its credit facility to pay the Company a dividend of $341.1 million. The Company used
the net proceeds from its offering of notes, the dividend paid by Chaparral and existing cash to purchase for cash all of its outstanding $600 million aggregate principal amount of 10.25% Senior Notes. The Company paid a total of $699.5 million to
the holders of the 10.25% Senior Notes, which was comprised of $600 million of principal, $3.6 million of accrued interest and $95.9 million of make-whole premiums and consent fees. In the current six-month period, the Company recorded a charge of
$107.0 million related to the early retirement of the 10.25% Senior Notes and old credit facility, consisting of $96.0 million in premiums or consent payments and transaction costs and a write-off of $11.0 million of debt issuance costs and interest
rate swap gains and losses associated with the debt repaid. On July 29, 2005, Chaparral became an independent, public company and the Company has no obligations with respect to Chaparrals long-term debt. Chaparral is not a guarantor of
any of the Companys indebtedness nor is the Company a guarantor of any Chaparral indebtedness.



7.25% Senior Notes.At any time on or prior to July 15, 2009, the Company may redeem the notes at a redemption price equal to the sum of the
principal amount thereof, plus accrued interest and a make-whole premium. On and after July 15, 2009, the Company may redeem the notes at a premium of 103.625% in 2009, 101.813% in 2010 and 100% in 2011 and thereafter. In addition, prior to
July 15, 2008, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 107.25% of the principal amount thereof, plus accrued interest and liquidated damages, if any, with the net cash
proceeds from certain equity offerings.



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If the Company experiences a change of control, it may be required to offer to purchase the notes at a
purchase price equal to 101% of the principal amount, plus accrued interest.



All of the Companys consolidated subsidiaries have unconditionally guaranteed the 7.25% Senior Notes. The indenture governing the notes contains covenants that will limit the Companys ability and the
ability of its subsidiaries to, among other things, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem its stock, make investments, sell assets, incur liens, enter into agreements restricting its
subsidiaries ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of its assets.



Senior Secured Revolving Credit Facility.The senior secured revolving credit facility expires in July 2010 and provides up to $200 million of
available borrowings. It includes a $50 million sub-limit for letters of credit. Any outstanding letters of credit are deducted from the borrowing availability under the facility. At November 30, 2005, $27.3 million of the facility was utilized
to support letters of credit. Amounts drawn under the facility bear interest either at the LIBOR rate plus a margin of 1% to 2%, or at a base rate (which is the higher of the federal funds rate plus 0.5% and the prime rate) plus a margin of up to
1%. The interest rate margins are subject to adjustments based on the Companys leverage ratio. Commitment fees are payable currently at an annual rate of 0.375% on the unused portion of the facility. The Company may terminate the facility at
any time.



All of the Companys consolidated subsidiaries
have guaranteed the Companys obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of the Companys existing and future accounts, inventory, equipment, intellectual
property and other personal property, and in all of the Companys equity interest in present and future domestic subsidiaries and 66% of the equity interest in any future foreign subsidiaries.



The credit facility contains covenants restricting, among other things,
prepayment or redemption of the Companys new senior notes, distributions, dividends and repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. The Company is
required to comply with certain financial tests and to maintain certain financial ratios, such as leverage and interest coverage ratios. At November 30, 2005, the Company was in compliance with all of its loan covenants.



Other.Maturities of long-term debt for each of the five succeeding
years are $700,000 for 2006, $1.5 million for 2007 and none for 2008 through 2010. The amount of interest paid was $40.3 million and $36.7 million in the six-month periods ended November 30, 2005 and 2004, respectively. No interest was
capitalized in either of the six-month periods ended November 30, 2005 and 2004.



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##### Table of Contents

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 which are the sole assets of the Trust. At November 30, 2005, 3,998,744 Preferred Securities, representing an undivided beneficial interest in $199.9 million of the $206.1 million aggregate principal
amount of Debentures, 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. On July 29, 2005, due to the spin-off of Chaparral the conversion rate was adjusted from 0.72218 shares to 0.97468 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 not paid by the Trust (the Guarantee). The Guarantee, when taken together with the obligations of the Company under the Debentures, the Indenture pursuant to which the
Debentures were issued, and the Amended and Restated Trust Agreement of the Trust (including its obligations to pay costs, fees, expenses, debts and other obligations of the Trust, other than with respect to the Preferred Securities and the common
securities of the Trust), provide a full and unconditional guarantee of amounts due on the Preferred Securities. The Preferred Securities do not have a stated maturity date, although they are subject to mandatory redemption upon maturity of the
Debentures on June 30, 2028, or upon earlier redemption.



SHAREHOLDERS EQUITY



Common stock consists of:



|                                            |  |                  |  |            
|------------------------------------------- |  | ---------------- |  | -----------
|In thousands                                |  | November 30,2005 |  | May 31,2005
|                                            |  |                 
|Shares authorized                           |  | 40,000           |  | 40,000     
|Shares outstanding                          |  | 23,046           |  | 22,728     
|Shares held in treasury                     |  | 2,021            |  | 2,339      
|Shares reserved for stock options and other |  | 3,758            |  | 4,036      



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. No shares of Cumulative Preferred Stock or Series B Junior Participating Preferred Stock were outstanding as of November 30, 2005.
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.



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##### Table of Contents

STOCK-BASED COMPENSATION



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



A summary of option transactions for the six-month period ended
November 30, 2005, follows:



|                                 |  |                    |   |  |                              |      
|-------------------------------- |  | ------------------ | - |  | ---------------------------- | -----
|                                 |  | Shares UnderOption |   |  | Weighted-AverageOption Price
|Outstanding at May 31, 2005      |  | 1,736,050          |   |  | $                            | 33.48
|Spin-off share adjustment        |  | 443,462            |   |  |                              |     
|Exercised                        |  | (383,511           | ) |  |                              | 24.80
|Canceled                         |  | (357,075           | ) |  |                              | 32.21
|                                 |  |                    |   |  |                              |      
|Outstanding at November 30, 2005 |  | 1,438,926          |   |  | $                            | 25.79
|                                 |  |                    |   |  |                              |      
|                                 |  |                   
|Exercisable at November 30, 2005 |  | 689,497            |   |  | $                            | 25.63
|                                 |  |                    |   |  |                              |      



Non-vested options
held by Chaparrals employees and new directors were cancelled on July 29, 2005 in connection with the spin-off of Chaparral. Options held by the Companys continuing employees and directors and vested options held by Chaparrals
employees and new directors were adjusted based on the closing share prices of the Company and Chaparral on July 29, 2005. Outstanding options expire on various dates to January 11, 2015. The Company has reserved 2,280,995 shares for
future awards under the 2004 Plan.



Other Stock-based
Compensation.The Company has provided stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments and a former stock awards program. At
November 30, 2005, outstanding Stock Appreciation Rights totaled 161,311 shares, deferred compensation agreements payable in cash totaled 97,707 shares, deferred compensation agreements payable in common stock totaled 27,636 shares and stock
awards totaled 10,020 shares. Total charges (credits) under these grants and restricted stock payments included in selling, general and administrative expense were $(900,000) and $2.0 million in the three-month periods ended November 30, 2005
and 2004, respectively, and $3.8 million and $2.7 million in the six-month periods ended November 30, 2005 and 2004, respectively.



INCOME TAXES



Federal income taxes for the interim periods ended November 30, 2005 and November 30, 2004, have been included in the accompanying financial
statements on the basis of an estimated annual rate for continuing operations. The estimated annualized rate for continuing operations does not include the tax impact of the loss on debt retirements and Chaparral spin-off charges. The estimated
annualized rate for continuing operations, excluding these charges, is 27.8% for 2005 compared to 27.1% for 2004. The effective rate for discontinued operations is 35% for 2005 and 2004, and reflects Chaparrals allocable share of such tax as
prescribed in the tax sharing agreement between the Company and Chaparral. The Company made income tax payments of $3.4 million and $8.7 million in the six-month periods ended November 30, 2005 and 2004, respectively.



The American Jobs Creation Act of 2004, among other things, allows a
deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. The Company is currently evaluating the impact of the new law on its future taxable income for the applicable years, but does not
anticipate a benefit for the current year because of an expected taxable loss for the year.



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##### Table of Contents

LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES



The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions 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 its subsidiaries are defendants in lawsuits which arose in
the normal course of business. In managements judgment 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.



In connection with the Companys spin-off of Chaparral, the Company
entered into a separation and distribution agreement and a tax sharing and indemnification agreement with Chaparral. In these agreements, the Company has indemnified Chaparral against, among other things, any liabilities arising out of the
businesses, assets or liabilities retained by the Company and any taxes imposed on Chaparral in connection with the spin-off that result from the Companys breach of its covenants in the tax sharing and indemnification agreement. Chaparral has
indemnified the Company against, among other things, any liabilities arising out of the businesses, assets or liabilities transferred to Chaparral and any taxes imposed on the Company in connection with the spin-off that result from Chaparrals
breach of its covenants in the tax sharing and indemnification agreement.



The Company and Chaparral have made certain covenants to each other in connection with the spin-off that prohibit the Company and Chaparral from taking certain actions. Pursuant to these covenants: (1) neither
the Company nor Chaparral will liquidate, merge, or consolidate with any other person, sell, exchange, distribute or otherwise dispose of its assets (or those of certain of its subsidiaries) except in the ordinary course of business, or enter into
any substantial negotiations, agreements, or arrangements, or arrangements with respect to any such transaction, during the six months following the distribution date of July 29, 2005; (2) the Company and Chaparral will, for a minimum of
two years after the distribution date, continue the active conduct of the cement or steel business, respectively; (3) neither the Company nor Chaparral will repurchase its stock for two years following the distribution except in certain
circumstances permitted by the IRS; (4) the Company and Chaparral will not take any actions inconsistent with the representations made in the separation and distribution agreement or in connection with the issuance by the Companys tax
counsel of its tax opinion with respect to the spin-off; and (5) the Company and Chaparral will not take or fail to take any other action that would result in any tax being imposed on the spin-off. The Company or Chaparral may take actions
inconsistent with these covenants if it obtains an unqualified opinion of counsel or a private letter ruling from the IRS that such actions will not cause the spin-off to become taxable, except that Chaparral may not, under any circumstances, take
any action described in (1) above.



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##### Table of Contents

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, 2005 and 2004, are as
follows:



|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|---------------------------------- |  | --------------- | ------ | - | -------------- | - | ------ | ---- |  | - | ---- | - |  | - | ---- | -
|                                   |  | Pension Benefit |        |   | Health Benefit |  
|In thousands                       |  | 2005            |        |   | 2004           |   |        | 2005 |  |   | 2004 |  
|Three months ended November 30     |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|Service cost                       |  | $               | 143    |   |                | $ | 109    |      |  | $ | 26   |   |  | $ | 23   |  
|Interest cost                      |  |                 | 624    |   |                |   | 644    |      |  |   | 87   |   |  |   | 123  |  
|Expected return on plan assets     |  |                 | (691   | ) |                |   | (611   | )    |  |   |     |   |  |   |     |  
|Amortization of prior service cost |  |                 |       |   |                |   |       |      |  |   | (211 | ) |  |   | (211 | )
|Amortization of net actuarial loss |  |                 | 263    |   |                |   | 125    |      |  |   | 184  |   |  |   | 226  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|                                   |  | $               | 339    |   |                | $ | 267    |      |  | $ | 86   |   |  | $ | 161  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|                                   |  |                 |        |  
|Six months ended November 30       |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|Service cost                       |  | $               | 286    |   |                | $ | 218    |      |  | $ | 53   |   |  | $ | 46   |  
|Interest cost                      |  |                 | 1,248  |   |                |   | 1,288  |      |  |   | 173  |   |  |   | 246  |  
|Expected return on plan assets     |  |                 | (1,382 | ) |                |   | (1,221 | )    |  |   |     |   |  |   |     |  
|Amortization of prior service cost |  |                 |       |   |                |   |       |      |  |   | (422 | ) |  |   | (422 | )
|Amortization of net actuarial loss |  |                 | 527    |   |                |   | 250    |      |  |   | 369  |   |  |   | 452  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  
|                                   |  | $               | 679    |   |                | $ | 535    |      |  | $ | 173  |   |  | $ | 322  |  
|                                   |  |                 |        |   |                |   |        |      |  |   |      |   |  |   |      |  



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



The amount of FSP benefit expense charged to
costs and expenses in the three-month and six-month periods ended November 30, 2005 and 2004, are as follows:



|                                  |  |             |       |   |      |   |       |  
|--------------------------------- |  | ----------- | ----- | - | ---- | - | ----- | -
|                                  |  | FSP Benefit |      
|In thousands                      |  | 2005        |       |   | 2004 |  
|Three-months ended November 30    |  |             |       |   |      |   |       |  
|Service cost                      |  | $           | 488   |   |      | $ | 415   |  
|Interest cost                     |  |             | 418   |   |      |   | 347   |  
|Amortization of transition amount |  |             |      |   |      |   | 42    |  
|Participant contributions         |  |             | (69   | ) |      |   | (66   | )
|                                  |  |             |       |   |      |   |       |  
|                                  |  | $           | 837   |   |      | $ | 738   |  
|                                  |  |             |       |   |      |   |       |  
|                                  |  |            
|Six-months ended November 30      |  |             |       |   |      |   |       |  
|Service cost                      |  | $           | 975   |   |      | $ | 830   |  
|Interest cost                     |  |             | 836   |   |      |   | 694   |  
|Amortization of transition amount |  |             |      |   |      |   | 83    |  
|Participant contributions         |  |             | (152  | ) |      |   | (149  | )
|                                  |  |             |       |   |      |   |       |  
|                                  |  | $           | 1,659 |   |      | $ | 1,458 |  
|                                  |  |             |       |   |      |   |       |  



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##### Table of Contents

DISCONTINUED OPERATIONS



On December 15, 2004, the Companys board of directors adopted a plan to spin-off the Companys steel
operations, which was completed on July 29, 2005. In anticipation of the spin-off, the Company entered into the following transactions:



The Company formed Chaparral Steel Company as a wholly-owned subsidiary. On June 25, 2005, the Company contributed to Chaparral all of its
subsidiaries engaged in the steel business. On July 6, 2005, the Company contributed or transferred to Chaparral real estate and transportation assets used in the steel business. Chaparral assumed all liabilities arising out of the steel
business and the transferred assets.



At various times the
Company settled intercompany indebtedness between and among the Company and its subsidiaries, including its subsidiaries engaged in the steel business. The Company settled these accounts through offsets, contributions of such indebtedness to the
capital of the debtor subsidiaries and other non-cash transfers. By the effective date of the spin-off, the Company had contributed to the capital of Chaparral and its subsidiaries the net intercompany indebtedness owed to it by Chaparral and its
subsidiaries.



On July 6, 2005, the Company issued $250
million principal amount of its 7.25% Senior Notes, entered into a new $200 million senior secured revolving credit facility with a syndicate of lenders, and terminated its then existing credit facility. The Company received net proceeds from the
note offering of $245.0 million. The terms of the new 7.25% Senior Notes and credit facility are more fully described in the Long-term Debt footnote on pages 12 and 13.



On July 6, 2005, Chaparral issued $300 million principal amount of senior notes and entered into a new $150 million
credit facility. Chaparral used the net proceeds from its note offering and borrowings under its credit facility to pay the Company a dividend of $341.1 million.



On July 6, 2005, the Company used the net proceeds from its offering of notes, the dividend paid by Chaparral and
existing cash to purchase for cash all of its outstanding $600 million principal amount of 10.25% Senior Notes. The Company paid a total of $699.5 million to the holders of the 10.25% Senior Notes, which was comprised of $600 million of principal,
$3.6 million of accrued interest and $95.9 million of make-whole premiums and consent fees.



As a consequence of the spin-off:



On July 29, 2005, Chaparral became an independent, public company. The Company has no further ownership interest in Chaparral or in any steel business, and Chaparral has no ownership interest in the Company. In addition, Chaparral is
not a guarantor of any of the Companys indebtedness nor is the Company a guarantor of any Chaparral indebtedness. The Companys relationship with Chaparral is now governed by a separation and distribution agreement and the ancillary
agreements described in that agreement. The terms of the agreements are more fully described in the Legal Proceedings and Contingent Liabilities note on page 16.



In the current six-month period the Company recorded a loss of $107.0 million related to the early retirement of the 10.25%
Senior Notes and old credit facility and incurred $5.4 million in spin-off related charges.



Summarized financial information for discontinued operations is presented below:



|                                    |  |                                |   |                              |   |          |  |      |         |  |   |        
|----------------------------------- |  | ------------------------------ | - | ---------------------------- | - | -------- |  | ---- | ------- |  | - | -------
|                                    |  | Three months endedNovember 30, |   | Six months endedNovember 30,
|In thousands                        |  | 2005                           |   | 2004                         |   | 2005 (a) |  | 2004
|Net sales                           |  | $                              |  |                              | $ | 249,119  |  | $    | 198,893 |  | $ | 539,900
|Cost and expenses                   |  |                                |  |                              |   | 216,475  |  |      | 185,509 |  |   | 463,626
|                                    |  |                                |   |                              |   |          |  |      |         |  |   |        
|Income before income/taxes          |  |                                |  |                              |   | 32,644   |  |      | 13,384  |  |   | 76,274 
|Income taxes                        |  |                                |  |                              |   | 11,429   |  |      | 4,693   |  |   | 26,703 
|                                    |  |                                |   |                              |   |          |  |      |         |  |   |        
|Income from discontinued operations |  | $                              |  |                              | $ | 21,215   |  | $    | 8,691   |  | $ | 49,571 
|                                    |  |                                |   |                              |   |          |  |      |         |  |   |        
|                                    |  |                                |   |                              |   |          |  |      |         |  |   |        

| | (a) | Includes operations through July 29, 2005.
| | --- | ------------------------------------------



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##### Table of Contents

The following is a summary of the assets and liabilities of discontinued operations as of the
July 29, 2005 spin-off and prior year-end.



|                                                |  |               |           |   |             |   |          
|----------------------------------------------- |  | ------------- | --------- | - | ----------- | - | ---------
|In thousands                                    |  | July 29, 2005 |           |   | May 31,2005
|Assets                                          |  |               |           |   |             |   |          
|Current assets                                  |  | $             | 361,863   |   |             | $ | 393,417  
|Property, plant and equipment  net             |  |               | 623,165   |   |             |   | 628,457  
|Goodwill                                        |  |               | 85,167    |   |             |   | 85,167   
|Other assets                                    |  |               | 16,742    |   |             |   | 7,586    
|                                                |  |               |           |   |             |   |          
|                                                |  |               | 1,086,937 |   |             |   | 1,114,627
|                                                |  |              
|Liabilities                                     |  |               |           |   |             |   |          
|Current liabilities                             |  |               | 70,312    |   |             |   | 130,757  
|Long-term debt                                  |  |               | 350,000   |   |             |   |         
|Deferred income taxes and other credits         |  |               | 149,316   |   |             |   | 147,770  
|                                                |  |               |           |   |             |   |          
|                                                |  |               | 569,628   |   |             |   | 278,527  
|                                                |  |               |           |   |             |   |          
|                                                |  |               | 517,309   |   |             |   | 836,100  
|Total distribution charged to retained earnings |  |               | (517,309  | ) |             |   |         
|                                                |  |               |           |   |             |   |          
|Net Assets of Discontinued Operations           |  | $             |          |   |             | $ | 836,100  
|                                                |  |               |           |   |             |   |          



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##### Table of Contents

CONDENSED CONSOLIDATING FINANCIAL INFORMATION



On July 6, 2005, Texas Industries, Inc. (the parent company) issued
$250 million principal amount of its 7.25% Senior Notes. All existing consolidated subsidiaries of the parent company are 100% owned and, excluding its Chaparral subsidiaries, provide 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 a guarantor
subsidiarys ability to obtain funds from the parent company or its direct or indirect subsidiaries.



The following condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the parent company, all
guarantor subsidiaries and all non-guarantor subsidiaries. The information has been presented as if the parent company accounted for its ownership of the guarantor and non-guarantor subsidiaries using the equity method of accounting.



|                                                           |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          
|---------------------------------------------------------- |  | -------------------- | --------- | --------------------- | - | ------------------------- |  | ------------------ | - |  | ------------ | -------- | - |  | - | ---------
|In thousands                                               |  | TexasIndustries,Inc. |           | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | EliminatingEntries |   |  | Consolidated
|                                                           |  |                      |           |                       |  
|Condensed consolidating balance sheet at November 30, 2005 |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          
|                                                           |  |                      |           |                       |  
|Cash and cash equivalents                                  |  | $                    | 131,523   |                       | $ | 1,764                     |  | $                  |  |  | $            |         |   |  | $ | 133,287  
|Short-term investments                                     |  |                      | 24,527    |                       |   |                          |  |                    |  |  |              |         |   |  |   | 24,527   
|Accounts receivablenet                                    |  |                      |          |                       |   | 105,329                   |  |                    |  |  |              |         |   |  |   | 105,329  
|Intercompany receivables                                   |  |                      | 2,340     |                       |   | 131,551                   |  |                    |  |  |              | (133,891 | ) |  |   |         
|Inventories                                                |  |                      |          |                       |   | 90,986                    |  |                    |  |  |              |         |   |  |   | 90,986   
|Deferred income taxes and prepaid expenses                 |  |                      | 1,469     |                       |   | 27,826                    |  |                    |  |  |              |         |   |  |   | 29,295   
|                                                           |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          
|Total current assets                                       |  |                      | 159,859   |                       |   | 357,456                   |  |                    |  |  |              | (133,891 | ) |  |   | 383,424  
|                                                           |  |                      |           |                       |  
|Goodwill                                                   |  |                      |          |                       |   | 61,307                    |  |                    |  |  |              |         |   |  |   | 61,307   
|Real estate and investments                                |  |                      | 94,154    |                       |   | 8,592                     |  |                    |  |  |              |         |   |  |   | 102,746  
|Deferred income taxes, intangibles and other charges       |  |                      | 64,263    |                       |   | 7,277                     |  |                    |  |  |              | (33,633  | ) |  |   | 37,907   
|Net assets of discontinued operations                      |  |                      |          |                       |   |                          |  |                    |  |  |              |         |   |  |   |         
|Investment in subsidiaries                                 |  |                      | 634,060   |                       |   |                          |  |                    |  |  |              | (634,060 | ) |  |   |         
|Long-term intercompany receivables                         |  |                      | 50,000    |                       |   |                          |  |                    |  |  |              | (50,000  | ) |  |   |         
|Property, plant and equipmentnet                          |  |                      |          |                       |   | 417,437                   |  |                    |  |  |              |         |   |  |   | 417,437  
|                                                           |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          
|Total assets                                               |  | $                    | 1,002,336 |                       | $ | 852,069                   |  | $                  |  |  | $            | (851,584 | ) |  | $ | 1,002,821
|                                                           |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          
|                                                           |  |                      |           |                       |  
|Accounts payable                                           |  | $                    | 132       |                       | $ | 69,211                    |  | $                  |  |  | $            |         |   |  | $ | 69,343   
|Intercompany payables                                      |  |                      | 131,551   |                       |   | 2,340                     |  |                    |  |  |              | (133,891 | ) |  |   |         
|Accrued interest, wages and other items                    |  |                      | 13,607    |                       |   | 32,037                    |  |                    |  |  |              |         |   |  |   | 45,644   
|Current portion of long-term debt                          |  |                      | 685       |                       |   |                          |  |                    |  |  |              |         |   |  |   | 685      
|                                                           |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          
|Total current liabilities                                  |  |                      | 145,975   |                       |   | 103,588                   |  |                    |  |  |              | (133,891 | ) |  |   | 115,672  
|                                                           |  |                      |           |                       |  
|Long-term debt                                             |  |                      | 251,848   |                       |   |                          |  |                    |  |  |              |         |   |  |   | 251,848  
|Convertible subordinated debentures                        |  |                      | 199,937   |                       |   |                          |  |                    |  |  |              |         |   |  |   | 199,937  
|Long-term intercompany payables                            |  |                      |          |                       |   | 50,000                    |  |                    |  |  |              | (50,000  | ) |  |   |         
|Deferred income taxes and other credits                    |  |                      | 27,763    |                       |   | 64,421                    |  |                    |  |  |              | (33,633  | ) |  |   | 58,551   
|Shareholders equity                                       |  |                      | 376,813   |                       |   | 634,060                   |  |                    |  |  |              | (634,060 | ) |  |   | 376,813  
|                                                           |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          
|Total liabilities and shareholders equity                 |  | $                    | 1,002,336 |                       | $ | 852,069                   |  | $                  |  |  | $            | (851,584 | ) |  | $ | 1,002,821
|                                                           |  |                      |           |                       |   |                           |  |                    |   |  |              |          |   |  |   |          



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|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|----------------------------------------------------- |  | -------------------- | --------- | - | --------------------- | - | ------------------------- |  | ------------------ | ------- |  | ------------ | ---------- | - |  | - | ---------
|In thousands                                          |  | TexasIndustries,Inc. |           |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | EliminatingEntries |         |  | Consolidated
|                                                      |  |                      |           |   |                      
|Condensed consolidating balance sheet at May 31, 2005 |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|                                                      |  |                      |           |   |                      
|Cash and cash equivalents                             |  | $                    | 241,287   |   |                       | $ | 10,313                    |  | $                  |        |  | $            |           |   |  | $ | 251,600  
|Short-term investments                                |  |                      |          |   |                       |   |                          |  |                    |        |  |              |           |   |  |   |         
|Accounts receivablenet                               |  |                      |          |   |                       |   | 117,363                   |  |                    |        |  |              |           |   |  |   | 117,363  
|Intercompany receivables                              |  |                      | 240,978   |   |                       |   | 15,360                    |  |                    |        |  |              | (256,338   | ) |  |   |         
|Inventories                                           |  |                      |          |   |                       |   | 83,291                    |  |                    |        |  |              |           |   |  |   | 83,291   
|Deferred income taxes and prepaid expenses            |  |                      | 698       |   |                       |   | 28,056                    |  |                    |        |  |              |           |   |  |   | 28,754   
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total current assets                                  |  |                      | 482,963   |   |                       |   | 254,383                   |  |                    |        |  |              | (256,338   | ) |  |   | 481,008  
|                                                      |  |                      |           |   |                      
|Goodwill                                              |  |                      |          |   |                       |   | 61,307                    |  |                    |        |  |              |           |   |  |   | 61,307   
|Real estate and investments                           |  |                      |          |   |                       |   | 100,200                   |  |                    |        |  |              |           |   |  |   | 100,200  
|Deferred income taxes, intangibles and other charges  |  |                      | 18,077    |   |                       |   | 10,287                    |  |                    |        |  |              | (793       | ) |  |   | 27,571   
|Net assets of discontinued operations                 |  |                      | (12,891   | ) |                       |   | 489,720                   |  |                    | 359,764 |  |              | (493       | ) |  |   | 836,100  
|Investment in subsidiaries                            |  |                      | 1,221,131 |   |                       |   |                          |  |                    |        |  |              | (1,221,131 | ) |  |   |         
|Long-term intercompany receivables                    |  |                      | 50,000    |   |                       |   |                          |  |                    |        |  |              | (50,000    | ) |  |   |         
|Property, plant and equipmentnet                     |  |                      |          |   |                       |   | 412,653                   |  |                    |        |  |              |           |   |  |   | 412,653  
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total assets                                          |  | $                    | 1,759,280 |   |                       | $ | 1,328,550                 |  | $                  | 359,764 |  | $            | (1,528,755 | ) |  | $ | 1,918,839
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|                                                      |  |                      |           |   |                      
|Accounts payable                                      |  | $                    | 297       |   |                       | $ | 57,725                    |  | $                  |        |  | $            |           |   |  | $ | 58,022   
|Intercompany payables                                 |  |                      | 15,360    |   |                       |   | 240,978                   |  |                    |        |  |              | (256,338   | ) |  |   |         
|Accrued interest, wages and other items               |  |                      | 11,084    |   |                       |   | 38,365                    |  |                    |        |  |              |           |   |  |   | 49,449   
|Current portion of long-term debt                     |  |                      | 680       |   |                       |   | 8                         |  |                    |        |  |              |           |   |  |   | 688      
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total current liabilities                             |  |                      | 27,421    |   |                       |   | 337,076                   |  |                    |        |  |              | (256,338   | ) |  |   | 108,159  
|                                                      |  |                      |           |   |                      
|Long-term debt                                        |  |                      | 602,747   |   |                       |   | 379                       |  |                    |        |  |              |           |   |  |   | 603,126  
|Convertible subordinated debentures                   |  |                      | 199,937   |   |                       |   |                          |  |                    |        |  |              |           |   |  |   | 199,937  
|Long-term intercompany payables                       |  |                      |          |   |                       |   | 50,000                    |  |                    |        |  |              | (50,000    | ) |  |   |         
|Deferred income taxes and other credits               |  |                      | 1,608     |   |                       |   | 79,235                    |  |                    |        |  |              | (793       | ) |  |   | 80,050   
|Shareholders equity                                  |  |                      | 927,567   |   |                       |   | 861,860                   |  |                    | 359,764 |  |              | (1,221,624 | ) |  |   | 927,567  
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total liabilities and shareholders equity            |  | $                    | 1,759,280 |   |                       | $ | 1,328,550                 |  | $                  | 359,764 |  | $            | (1,528,755 | ) |  | $ | 1,918,839
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          



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|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | -------------------- | ------ | - | --------------------- | - | ------- | ------------------------- |  | ------------------ | ------ |  | ------------ | ------- | - |  | - | ------- | -
|In thousands                                                                             |  | TexasIndustries,Inc. |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | EliminatingEntries |        |  | Consolidated |        
|                                                                                        
|Condensed consolidating statement of operations for three months ended November 30, 2005 | 
|                                                                                         |  |                      |        |   |                      
|Net sales                                                                                |  | $                    |       |   |                       | $ | 220,764 |                           |  | $                  |       |  | $            |        |   |  | $ | 220,764 |  
|Costs and expenses (income)                                                              |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Cost of products sold                                                                    |  |                      |       |   |                       |   | 197,935 |                           |  |                    |       |  |              |        |   |  |   | 197,935 |  
|Selling, general and administrative                                                      |  |                      | 255    |   |                       |   | 14,577  |                           |  |                    |       |  |              |        |   |  |   | 14,832  |  
|Interest                                                                                 |  |                      | 7,847  |   |                       |   | 877     |                           |  |                    |       |  |              | (873    | ) |  |   | 7,851   |  
|Loss on debt retirements and spin-off charges                                            |  |                      | 107    |   |                       |   |        |                           |  |                    |       |  |              |        |   |  |   | 107     |  
|Other income                                                                             |  |                      | (1,405 | ) |                       |   | (6,756  | )                         |  |                    |       |  |              |        |   |  |   | (8,161  | )
|Intercompany other income                                                                |  |                      | (873   | ) |                       |   |        |                           |  |                    |       |  |              | 873     |   |  |   |        |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | 5,931  |   |                       |   | 206,633 |                           |  |                    |       |  |              |        |   |  |   | 212,564 |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                                 |  |                      | (5,931 | ) |                       |   | 14,131  |                           |  |                    |       |  |              |        |   |  |   | 8,200   |  
|Income taxes (benefit)                                                                   |  |                      | (2,041 | ) |                       |   | 4,047   |                           |  |                    |       |  |              |        |   |  |   | 2,006   |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | (3,890 | ) |                       |   | 10,084  |                           |  |                    |       |  |              |        |   |  |   | 6,194   |  
|Income from discontinued operationsnet of income taxes                                  |  |                      |       |   |                       |   |        |                           |  |                    |       |  |              |        |   |  |   |        |  
|Equity in earnings (loss) of subsidiaries                                                |  |                      | 10,084 |   |                       |   |        |                           |  |                    |       |  |              | (10,084 | ) |  |   |        |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                    | 6,194  |   |                       | $ | 10,084  |                           |  | $                  |       |  | $            | (10,084 | ) |  | $ | 6,194   |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                        
|Condensed consolidating statement of operations for three months ended November 30, 2004 | 
|                                                                                         |  |                      |        |   |                      
|Net sales                                                                                |  | $                    |       |   |                       | $ | 194,598 |                           |  | $                  |       |  | $            |        |   |  | $ | 194,598 |  
|Costs and expenses (income)                                                              |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Cost of products sold                                                                    |  |                      |       |   |                       |   | 166,153 |                           |  |                    |       |  |              | (4      | ) |  |   | 166,149 |  
|Selling, general and administrative                                                      |  |                      | 832    |   |                       |   | 19,491  |                           |  |                    |       |  |              |        |   |  |   | 20,323  |  
|Interest                                                                                 |  |                      | 5,032  |   |                       |   | 885     |                           |  |                    |       |  |              | (873    | ) |  |   | 5,044   |  
|Loss on debt retirements and spin-off charges                                            |  |                      |       |   |                       |   |        |                           |  |                    |       |  |              |        |   |  |   |        |  
|Other income                                                                             |  |                      | (637   | ) |                       |   | (9,784  | )                         |  |                    |       |  |              |        |   |  |   | (10,421 | )
|Intercompany other income                                                                |  |                      | (873   | ) |                       |   |        |                           |  |                    |       |  |              | 873     |   |  |   |        |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | 4,354  |   |                       |   | 176,745 |                           |  |                    |       |  |              | (4      | ) |  |   | 181,095 |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                                 |  |                      | (4,354 | ) |                       |   | 17,853  |                           |  |                    |       |  |              | 4       |   |  |   | 13,503  |  
|Income taxes (benefit)                                                                   |  |                      | (1,506 | ) |                       |   | 5,265   |                           |  |                    |       |  |              | 2       |   |  |   | 3,761   |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                         |  |                      | (2,848 | ) |                       |   | 12,588  |                           |  |                    |       |  |              | 2       |   |  |   | 9,742   |  
|Income from discontinued operationsnet of income taxes                                  |  |                      |       |   |                       |   | (261    | )                         |  |                    | 21,476 |  |              |        |   |  |   | 21,215  |  
|Equity in earnings (loss) of subsidiaries                                                |  |                      | 33,805 |   |                       |   |        |                           |  |                    |       |  |              | (33,805 | ) |  |   |        |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                    | 30,957 |   |                       | $ | 12,327  |                           |  | $                  | 21,476 |  | $            | (33,803 | ) |  | $ | 30,957  |  
|                                                                                         |  |                      |        |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  



22



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|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|-------------------------------------------------------------------------------------- |  | -------------------- | -------- | - | --------------------- | - | ------- | ------------------------- |  | ------------------ | ------ |  | ------------ | ------- | - |  | - | ------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | EliminatingEntries |        |  | Consolidated |        
|                                                                                      
|Condensed consolidating statement of operations for six months ended November 30, 2005 | 
|                                                                                       |  |                      |          |   |                      
|Net sales                                                                              |  | $                    |         |   |                       | $ | 462,648 |                           |  | $                  |       |  | $            |        |   |  | $ | 462,648 |  
|Costs and expenses (income)                                                            |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |         |   |                       |   | 392,156 |                           |  |                    |       |  |              |        |   |  |   | 392,156 |  
|Selling, general and administrative                                                    |  |                      | 3,050    |   |                       |   | 35,010  |                           |  |                    |       |  |              |        |   |  |   | 38,060  |  
|Interest                                                                               |  |                      | 17,107   |   |                       |   | 1,763   |                           |  |                    |       |  |              | (1,755  | ) |  |   | 17,115  |  
|Loss on debt retirements and spin-off charges                                          |  |                      | 112,391  |   |                       |   |        |                           |  |                    |       |  |              |        |   |  |   | 112,391 |  
|Other income                                                                           |  |                      | (2,867   | ) |                       |   | (9,435  | )                         |  |                    |       |  |              |        |   |  |   | (12,302 | )
|Intercompany other income                                                              |  |                      | (1,755   | ) |                       |   |        |                           |  |                    |       |  |              | 1,755   |   |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 127,926  |   |                       |   | 419,494 |                           |  |                    |       |  |              |        |   |  |   | 547,420 |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (127,926 | ) |                       |   | 43,154  |                           |  |                    |       |  |              |        |   |  |   | (84,772 | )
|Income taxes (benefit)                                                                 |  |                      | (44,892  | ) |                       |   | 13,950  |                           |  |                    |       |  |              |        |   |  |   | (30,942 | )
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (83,034  | ) |                       |   | 29,204  |                           |  |                    |       |  |              |        |   |  |   | (53,830 | )
|Income from discontinued operationsnet of income taxes                                |  |                      |         |   |                       |   | (176    | )                         |  |                    | 8,867  |  |              |        |   |  |   | 8,691   |  
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 37,895   |   |                       |   |        |                           |  |                    |       |  |              | (37,895 | ) |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | (45,139  | ) |                       | $ | 29,028  |                           |  | $                  | 8,867  |  | $            | (37,895 | ) |  | $ | (45,139 | )
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                      
|Condensed consolidating statement of operations for six months ended November 30, 2004 | 
|                                                                                       |  |                      |          |   |                      
|Net sales                                                                              |  | $                    |         |   |                       | $ | 403,671 |                           |  | $                  |       |  | $            |        |   |  | $ | 403,671 |  
|Costs and expenses (income)                                                            |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |         |   |                       |   | 343,775 |                           |  |                    |       |  |              | (8      | ) |  |   | 343,767 |  
|Selling, general and administrative                                                    |  |                      | 1,151    |   |                       |   | 38,362  |                           |  |                    |       |  |              |        |   |  |   | 39,513  |  
|Interest                                                                               |  |                      | 10,037   |   |                       |   | 1,892   |                           |  |                    |       |  |              | (1,755  | ) |  |   | 10,174  |  
|Loss on debt retirements and spin-off charges                                          |  |                      |         |   |                       |   |        |                           |  |                    |       |  |              |        |   |  |   |        |  
|Other income                                                                           |  |                      | (984     | ) |                       |   | (12,478 | )                         |  |                    |       |  |              |        |   |  |   | (13,462 | )
|Intercompany other income                                                              |  |                      | (1,755   | ) |                       |   |        |                           |  |                    |       |  |              | 1,755   |   |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 8,449    |   |                       |   | 371,551 |                           |  |                    |       |  |              | (8      | ) |  |   | 379,992 |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (8,449   | ) |                       |   | 32,120  |                           |  |                    |       |  |              | 8       |   |  |   | 23,679  |  
|Income taxes (benefit)                                                                 |  |                      | (2,939   | ) |                       |   | 9,346   |                           |  |                    |       |  |              | 3       |   |  |   | 6,410   |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (5,510   | ) |                       |   | 22,774  |                           |  |                    |       |  |              | 5       |   |  |   | 17,269  |  
|Income from discontinued operationsnet of income taxes                                |  |                      |         |   |                       |   | (526    | )                         |  |                    | 50,097 |  |              |        |   |  |   | 49,571  |  
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 72,350   |   |                       |   |        |                           |  |                    |       |  |              | (72,350 | ) |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | 66,840   |   |                       | $ | 22,248  |                           |  | $                  | 50,097 |  | $            | (72,345 | ) |  | $ | 66,840  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  



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|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | -------------------- | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------ | - |  | ------------ | -------- | - |  | - | -------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | EliminatingEntries |   |  | Consolidated |         
|                                                                                      
|Condensed consolidating statement of cash flows for six months ended November 30, 2005 | 
|                                                                                       |  |                      |          |   |                      
|Continuing Operations                                                                  |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash provided by continuing operating activities                                       |  | $                    | 27,611   |   |                       | $ | 10,688  |                           |  | $ |                   |   |  | $            | 10,423   |   |  | $ | 48,722   |  
|                                                                                       |  |                      |          |   |                      
|Investing activities                                                                   |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Capital expendituresexpansions                                                        |  |                      |         |   |                       |   | (12,019 | )                         |  |   |                   |   |  |              |         |   |  |   | (12,019  | )
|Capital expendituresother                                                             |  |                      |         |   |                       |   | (17,884 | )                         |  |   |                   |   |  |              |         |   |  |   | (17,884  | )
|Proceeds from asset disposals                                                          |  |                      |         |   |                       |   | 10,429  |                           |  |   |                   |   |  |              |         |   |  |   | 10,429   |  
|Purchases of short-term investments                                                    |  |                      | (24,527  | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (24,527  | )
|Investments in life insurance contracts                                                |  |                      | (2,749   | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (2,749   | )
|Intercompany investing activities                                                      |  |                      | 341,139  |   |                       |   |        |                           |  |   |                   |   |  |              | (341,139 | ) |  |   |         |  
|Othernet                                                                              |  |                      |         |   |                       |   | 237     |                           |  |   |                   |   |  |              |         |   |  |   | 237      |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash used by continuing investing activities                                           |  |                      | 313,863  |   |                       |   | (19,237 | )                         |  |   |                   |   |  |              | (341,139 | ) |  |   | (46,513  | )
|                                                                                       |  |                      |          |   |                      
|Financing activities                                                                   |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Long-term borrowings                                                                   |  |                      | 250,000  |   |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | 250,000  |  
|Debt retirements                                                                       |  |                      | (600,351 | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (600,351 | )
|Debt issuance costs                                                                    |  |                      | (7,298   | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (7,298   | )
|Debt retirement costs                                                                  |  |                      | (96,029  | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (96,029  | )
|Interest rate swap terminations                                                        |  |                      |         |   |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   |         |  
|Stock option exercises                                                                 |  |                      | 5,880    |   |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | 5,880    |  
|Common dividends paid                                                                  |  |                      | (3,440   | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (3,440   | )
|Othernet                                                                              |  |                      |         |   |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash provided (used ) by continuing financing activities                               |  |                      | (451,238 | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (451,238 | )
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Net Cash Provided (Used) by Continuing Operations                                      |  |                      | (109,764 | ) |                       |   | (8,549  | )                         |  |   |                   |   |  |              | (330,716 | ) |  |   | (449,029 | )
|                                                                                       |  |                      |          |   |                      
|Discontinued Operations                                                                |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash provided (used) by discontinued operating activities                              |  |                      |         |   |                       |   |        |                           |  |   | 3,309              |   |  |              | (10,423  | ) |  |   | (7,114   | )
|Cash used by discontinued investing activities                                         |  |                      |         |   |                       |   |        |                           |  |   | (343,896           | ) |  |              | 341,139  |   |  |   | (2,757   | )
|Cash provided by discontinued financing activities                                     |  |                      |         |   |                       |   |        |                           |  |   | 340,587            |   |  |              |         |   |  |   | 340,587  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Net Cash Provided by Discontinued Operations                                           |  |                      |         |   |                       |   |        |                           |  |   |                   |   |  |              | 330,716  |   |  |   | 330,716  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Increase (Decrease) in Cash and Cash Equivalents                                       |  |                      | (109,764 | ) |                       |   | (8,549  | )                         |  |   |                   |   |  |              |         |   |  |   | (118,313 | )
|Cash and Cash Equivalents at Beginning of Period                                       |  |                      | 241,287  |   |                       |   | 10,313  |                           |  |   |                   |   |  |              |         |   |  |   | 251,600  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash and Cash Equivalents at End of Period                                             |  | $                    | 131,523  |   |                       | $ | 1,764   |                           |  | $ |                   |   |  | $            |         |   |  | $ | 133,287  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  



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##### 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 | 
|                                                                                       |  |                      |         |   |                      
|Continuing Operations                                                                  |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Cash provided by continuing operating activities                                       |  | $                    | 20,559  |   |                       | $ | 81,338  |                           |  | $ |                   |   |  | $            | (3,594 | ) |  | $ | 98,303  |  
|                                                                                       |  |                      |         |   |                      
|Investing activities                                                                   |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Capital expendituresexpansions                                                        |  |                      |        |   |                       |   | (1,294  | )                         |  |   |                   |   |  |              |       |   |  |   | (1,294  | )
|Capital expendituresother                                                             |  |                      |        |   |                       |   | (15,604 | )                         |  |   |                   |   |  |              |       |   |  |   | (15,604 | )
|Proceeds from asset disposals                                                          |  |                      |        |   |                       |   | 2,607   |                           |  |   |                   |   |  |              |       |   |  |   | 2,607   |  
|Purchases of short-term investments                                                    |  |                      | (500    | ) |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   | (500    | )
|Investments in life insurance contracts                                                |  |                      |        |   |                       |   | (57,342 | )                         |  |   |                   |   |  |              |       |   |  |   | (57,342 | )
|Intercompany investing activities                                                      |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   |        |  
|Othernet                                                                              |  |                      |        |   |                       |   | (4,841  | )                         |  |   |                   |   |  |              |       |   |  |   | (4,841  | )
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Cash used by continuing investing activities                                           |  |                      | (500    | ) |                       |   | (76,474 | )                         |  |   |                   |   |  |              |       |   |  |   | (76,974 | )
|                                                                                       |  |                      |         |   |                      
|Financing activities                                                                   |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Long-term borrowings                                                                   |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   |        |  
|Debt retirements                                                                       |  |                      | (340    | ) |                       |   | (8      | )                         |  |   |                   |   |  |              |       |   |  |   | (348    | )
|Debt issuance costs                                                                    |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   |        |  
|Debt retirement costs                                                                  |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   |        |  
|Interest rate swap terminations                                                        |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   |        |  
|Stock option exercises                                                                 |  |                      | 23,116  |   |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   | 23,116  |  
|Common dividends paid                                                                  |  |                      | (3,244  | ) |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   | (3,244  | )
|Othernet                                                                              |  |                      | (61     | ) |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   | (61     | )
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Cash provided (used ) by continuing financing activities                               |  |                      | 19,471  |   |                       |   | (8      | )                         |  |   |                   |   |  |              |       |   |  |   | 19,463  |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Net Cash Provided (Used) by Continuing Operations                                      |  |                      | 39,530  |   |                       |   | 4,856   |                           |  |   |                   |   |  |              | (3,594 | ) |  |   | 40,792  |  
|                                                                                       |  |                      |         |   |                      
|Discontinued Operations                                                                |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Cash provided (used) by discontinued operating activities                              |  |                      |        |   |                       |   | 547     |                           |  |   | 10,027             |   |  |              | 3,594  |   |  |   | 14,168  |  
|Cash used by discontinued investing activities                                         |  |                      |        |   |                       |   | (547    | )                         |  |   | (10,027            | ) |  |              |       |   |  |   | (10,574 | )
|Cash provided by discontinued financing activities                                     |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |       |   |  |   |        |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Net Cash Provided by Discontinued Operations                                           |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              | 3,594  |   |  |   | 3,594   |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Increase (Decrease) in Cash and Cash Equivalents                                       |  |                      | 39,530  |   |                       |   | 4,856   |                           |  |   |                   |   |  |              |       |   |  |   | 44,386  |  
|Cash and Cash Equivalents at Beginning of Period                                       |  |                      | 134,813 |   |                       |   | (1,760  | )                         |  |   |                   |   |  |              |       |   |  |   | 133,053 |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  
|Cash and Cash Equivalents at End of Period                                             |  | $                    | 174,343 |   |                       | $ | 3,096   |                           |  | $ |                   |   |  | $            |       |   |  | $ | 177,439 |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |        |   |  |   |         |  



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##### Table of Contents

EXHIBIT A



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM



Board of
Directors and Shareholders

Texas Industries, Inc.



We have reviewed the accompanying consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of November 30, 2005, and
the related consolidated statements of operations for the three and six-month periods ended November 30, 2005 and 2004 and the related consolidated statements of cash flows for the six-month periods ended November 30, 2005 and 2004. These
financial statements are the responsibility of the Companys management.



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



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



We have previously audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2005, 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 August 10, 2005, except for the matters discussed in the last paragraph of the Discontinued Operations footnote, as to
which the date is November 11, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of May 31, 2005, is fairly
stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



/s/ Ernst & Young LLP




Dallas, Texas

January 4, 2006



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##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



We are a leading supplier of construction materials. On July 29, 2005,
we completed the spin-off of our steel segment in the form of a pro-rata, tax-free dividend to our shareholders of one share of Chaparral Steel Company (Chaparral) common stock for each share of our common stock that was owned on
July 20, 2005. As a result of the spin-off, the operating results of the steel segment prior to the spin-off are presented as discontinued operations. See Notes to Consolidated Financial Statements footnote entitled Discontinued
Operations on pages 18 and 19. Our continuing operations constitute a single business segment which 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.



RESULTS OF OPERATIONS



Net Sales. The
following table presents certain sales information regarding our major products.



|                               |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|------------------------------ |  | ------------------------------ | ------- | - | ---------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                               |  | Three months endedNovember 30, |         |   | Six months endedNovember 30, |  
|In thousands except per unit   |  | 2005                           |         |   | 2004                         |   |         | 2005 |  |   | 2004    |  
|                               |  |                                |         |  
|Sales                          |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Cement                         |  | $                              | 105,442 |   |                              | $ | 95,879  |      |  | $ | 215,517 |   |  | $ | 200,236 |  
|Stone, sand and gravel         |  |                                | 34,830  |   |                              |   | 30,596  |      |  |   | 76,723  |   |  |   | 63,120  |  
|Ready-mix                      |  |                                | 66,536  |   |                              |   | 55,225  |      |  |   | 136,289 |   |  |   | 109,744 |  
|Other products                 |  |                                | 24,032  |   |                              |   | 22,893  |      |  |   | 52,780  |   |  |   | 48,902  |  
|Interplant                     |  |                                | (28,949 | ) |                              |   | (26,439 | )    |  |   | (58,428 | ) |  |   | (51,902 | )
|Delivery fees                  |  |                                | 18,873  |   |                              |   | 16,444  |      |  |   | 39,767  |   |  |   | 33,571  |  
|                               |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Net Sales                      |  | $                              | 220,764 |   |                              | $ | 194,598 |      |  | $ | 462,648 |   |  | $ | 403,671 |  
|                               |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|                               |  |                                |         |  
|Shipments                      |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Cement (tons)                  |  |                                | 1,241   |   |                              |   | 1,299   |      |  |   | 2,583   |   |  |   | 2,748   |  
|Stone, sand and gravel (tons)  |  |                                | 5,954   |   |                              |   | 5,465   |      |  |   | 13,267  |   |  |   | 11,295  |  
|Ready-mix (cubic yards)        |  |                                | 971     |   |                              |   | 929     |      |  |   | 2,012   |   |  |   | 1,868   |  
|                               |  |                                |         |  
|Prices                         |  |                                |         |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Cement ($/ton)                 |  | $                              | 84.94   |   |                              | $ | 73.81   |      |  | $ | 83.42   |   |  | $ | 72.85   |  
|Stone, sand and gravel ($/ton) |  |                                | 5.85    |   |                              |   | 5.60    |      |  |   | 5.78    |   |  |   | 5.59    |  
|Ready-mix ($/cubic yard)       |  |                                | 68.51   |   |                              |   | 59.42   |      |  |   | 67.72   |   |  |   | 58.77   |  



Net sales were $220.8
million in the current three-month period, an increase of $26.2 million or 13% from the prior year period. Total cement sales increased $9.6 million on 15% higher average prices and 4% lower shipments. Total aggregate sales increased $4.2 million on
4% higher average prices and 9% higher shipments. Total ready-mix sales increased $11.3 million on 15% higher average prices and 5% higher volume.



Net sales were $462.6 million in the current six-month period, an increase of $59.0 million or 15% from the prior year period. Total cement sales
increased $15.3 million on 15% higher average prices and 6% lower shipments. Total aggregate sales increased $13.6 million on 3% higher average prices and 17% higher shipments. Total ready-mix sales increased $26.5 million on 15% higher average
prices and 8% higher volume.



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##### Table of Contents

Scheduled maintenance downtime at both of our Texas cement plants in the November 2005 quarter limited
cement shipments in the current quarter. The unexpected downtime of our north Texas cement plants largest finish mill in the August 2005 quarter further limited cement shipments in the current six-month period. Following the maintenance work
the Texas cement plants have performed well with the north Texas plant setting production and availability records for the month of November 2005. Aggregate and ready-mix shipments in the prior year period were impacted by inclement weather.



Construction activity in the Texas and California markets we
serve remains solid. We believe market conditions should continue to support the price improvement we have experienced.



Cost of Products Sold. Cost of products sold was $197.9 million in the current three-month period and $392.2 million in the current six-month
period, an increase from the prior year periods of $31.8 million and $48.4 million, respectively. Energy costs, particularly the cost of electricity we use in cement production, escalated during the last half of the August 2005 quarter and remained
at high levels throughout the November 2005 quarter increasing costs approximately $14 million in the current quarter. The cost of scheduled maintenance downtime at our Texas cement plants in the November 30, 2005 quarter also increased costs
approximately $10 million. Aggregate and ready-mix operations benefited from the efficiencies of higher production volumes.



Selling, General and Administrative.Selling, general and administrative expense was $14.8 million in the current three-month period, a decrease of
$5.5 million from the prior year period primarily as a result of a $2.9 million decrease in stock-based compensation and $1.9 million decrease in incentive compensation expense. Selling, general and administrative expense was $38.1 million in the
current six-month period, a decrease of $1.5 million from the prior year period primarily as a result of a $2.0 million decrease in incentive compensation expense offset in part by a $1.1 million increase in stock-based compensation expense.



Interest.Interest expense was $7.9 million in the
current three-month period, an increase of $2.8 million from the prior year period. Interest expense was $17.1 million in the current six-month period, an increase of $6.9 million from the prior year period. In connection with the spin-off of
Chaparral, we entered into new financing agreements and purchased the outstanding $600 million aggregate principal amount of 10.25% senior notes due 2011. On July 6, 2005, we issued $250 million aggregate principal amount of new 7.25% senior
notes due 2013 and entered into a separate new senior secured revolving credit facility.



Interest expense to be capitalized on costs incurred for our Oro Grande, California cement plant expansion and modernization project will reduce the amount of interest expense recognized during the upcoming two year
construction period. Total interest to be capitalized related to this project is currently estimated at $25 million.



Prior to the spin-off of Chaparral interest was allocated between continuing and discontinued operations based on the historic use of funds derived from
long-term borrowings. Total accrued interest for the three-month period ended November 30, 2004 was $17.0 million, of which $12.0 million was allocated to discontinued operations. Total accrued interest for the six-month period ended
November 30, 2005 was $22.5 million, of which $5.4 million was allocated to discontinued operations. Total accrued interest for the six-month period ended November 30, 2004 was $34.1 million, of which $23.9 million was allocated to
discontinued operations.



Loss on Debt Retirements and
Spin-off Charges.The six-month period ended November 30, 2005 includes a loss of $107.0 million related to the early retirement of our 10.25% senior notes and old credit facility consisting of $96.0 million in make-whole premiums and
consent payments plus transaction costs and a write-off of $11.0 million of debt issuance costs and interest rate swap gains and losses associated with the debt repaid. In addition, we incurred $5.4 million in charges related to the spin-off of
Chaparral.



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##### Table of Contents

Other Income.Other income was $8.2 million in the current three-month period, a decrease of $2.3
million from the prior year period. Other income was $12.3 million in the current six-month period, a decrease of $1.2 million from the prior year period. Other income in the current periods includes a gain of $3.7 million resulting from the sale of
certain investment assets. Other income in the prior year periods includes a gain of $6.2 million resulting from the sale of emissions credits associated with the Companys expanded shale and clay operations in south Texas. Routine sales of
surplus operating assets and real estate resulted in gains of $2.4 million and $2.6 million in the three-month periods ended November 30, 2005 and 2004, respectively, and $4.6 million and $4.7 million in the six-month periods ended
November 30, 2005 and 2004, respectively. Interest income was $1.4 million and $700,000 in the three-month periods ended November 30, 2005 and 2004, respectively, and $2.9 million and $1.0 million in the six-month periods ended
November 30, 2005 and 2004, respectively.



Income
Taxes.Federal income taxes for the interim periods ended November 30, 2005 and 2004 have been included in the accompanying financial statements on the basis of an estimated annual rate. The estimated annualized rate does not include the
tax impact of the loss on debt retirements and Chaparral spin-off charges. The estimated annualized rate for continuing operations, excluding these charges, is 27.8% for 2005 compared to 27.1% for 2004. The effective rate for discontinued operations
is 35% for 2005 and 2004, and reflects Chaparrals allocable share of such tax as prescribed in our tax sharing agreement with Chaparral.



The American Jobs Creation Act of 2004, among other things, allows a deduction for income from qualified domestic production activities, which will be
phased in from 2005 through 2010. The Company is currently evaluating the impact of the new law on its future taxable income for the applicable years, but does not anticipate a benefit for the current year because of an expected taxable loss for the
year.



Income from Discontinued Operations  Net of
Income Taxes.As a result of the spin-off of Chaparral, the operating results of our steel segment, including the allocation of certain corporate expenses, have been reclassified and presented as discontinued operations. The six-month period
ended November 30, 2005 includes steel operations through the July 29, 2005 spin-off date.



LIQUIDITY AND CAPITAL RESOURCES



In addition to cash and cash equivalents of $133.3 million at November 30, 2005, our sources of liquidity include cash from operations, proceeds from
sales of our short-term investments, borrowings available under our $200 million senior secured revolving credit facility and distributions available from our investments in life insurance contracts.



Short-term Investments.Our short-term investments, totaling $24.5
million at November 30, 2005, consist of investment grade auction rate securities with an active resale market to ensure liquidity and the ability to be readily converted into cash. These securities are expected to be sold within one year to
fund current operations, or satisfy other cash requirements as needed.



Senior Secured Revolving Credit Facility.We have available a $200 million senior secured revolving credit facility expiring in July 2010. It includes a $50 million sub-limit for letters of credit. Any outstanding letters of credit
are deducted from the borrowing availability under the facility. At November 30, 2005, $27.3 million of the facility was utilized to support letters of credit. Amounts drawn under the facility bear interest either at the LIBOR rate plus a
margin of 1% to 2%, or at a base rate (which is the higher of the federal funds rate plus 0.5% and the prime rate) plus a margin of up to 1%. The interest rate margins are subject to adjustments based on our leverage ratio.



All of our consolidated subsidiaries, following the spin-off of Chaparral,
have guaranteed our obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of our existing and future accounts, inventory, equipment, intellectual property and other personal
property, and in all of our equity interest in present and future domestic subsidiaries and 66% of the equity interest in any future foreign subsidiaries.



The credit facility contains covenants restricting, among other things, prepayment or redemption of our new 7.25% senior notes, distributions, dividends
and repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. We are required to comply with certain financial tests and to maintain certain financial ratios, such as
leverage and interest coverage ratios. We are in compliance with all of our loan covenants.



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Investments of Life Insurance Contracts.During the six-month period ended November 30, 2004
previous distributions received from our investments in life insurance contracts in the amount of $51.2 million were repaid. Approximately $50 million of these funds are available for redistribution at our election.



Contractual Obligations.The following is a summary of our estimated
future payments under our material contractual obligations as of November 30, 2005.



|                                             |  |                             |           |      |   |         |  |      |         |           |   |            |  |   |        |  |   |        
|-------------------------------------------- |  | --------------------------- | --------- | ---- | - | ------- |  | ---- | ------- | --------- | - | ---------- |  | - | ------ |  | - | -------
|                                             |  | Periods ending November 30,
|In thousands                                 |  | Total                       |           | 2006 |   | 2007    |  | 2008 |         | 2009-2010 |   | After 2010
|Long-term debt (1)                           |  | $                           | 252,533   |      | $ | 685     |  | $    | 1,475   |           | $ |           |  | $ |       |  | $ | 250,373
|Convertible subordinated debentures (2)      |  |                             | 199,937   |      |   |        |  |      |        |           |   |           |  |   |       |  |   | 199,937
|Leases (3)                                   |  |                             | 59,272    |      |   | 15,492  |  |      | 8,582   |           |   | 8,227      |  |   | 16,727 |  |   | 10,244 
|Coal supply contracts (4)                    |  |                             | 88,876    |      |   | 23,066  |  |      | 30,894  |           |   | 32,223     |  |   | 2,693  |  |   |       
|Other unconditional purchase obligations (5) |  |                             | 344,700   |      |   | 210,200 |  |      | 129,500 |           |   | 5,000      |  |   |       |  |   |       
|Asset retirement obligations (6)             |  |                             | 19,330    |      |   | 970     |  |      | 491     |           |   | 288        |  |   | 379    |  |   | 17,202 
|Defined benefit plans (7) (8)                |  |                             | 93,147    |      |   | 2,685   |  |      | 2,534   |           |   | 2,748      |  |   | 6,470  |  |   | 78,710 
|                                             |  |                             |           |      |   |         |  |      |         |           |   |            |  |   |        |  |   |        
|                                             |  | $                           | 1,057,795 |      | $ | 253,098 |  | $    | 173,476 |           | $ | 48,486     |  | $ | 26,269 |  | $ | 556,466
|                                             |  |                             |           |      |   |         |  |      |         |           |   |            |  |   |        |  |   |        
|                                             |  |                             |           |      |   |         |  |      |         |           |   |            |  |   |        |  |   |        

| | (1) | Our long-term debt is described in Notes to Consolidated Financial Statements footnote entitled Long-term Debt on pages 12 and 13. Our outstanding letters of credit
issued under the senior secured revolving credit facility only collateralize payment of recorded liabilities.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Our convertible subordinated debentures are described in Notes to Consolidated Financial Statements footnote entitled Convertible Subordinated Debentures on page 14.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | We lease certain mobile and other equipment used in our operations under operating leases that may in the normal course of business be renewed or replaced by subsequent leases.
Future payments under leases exclude mineral rights which are insignificant and are generally required only for products produced.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | In December 2005 we renegotiated three long-term contracts for the purchase of coal for use in both cement plants and one expanded shale and clay plant in Texas that now require
minimum amounts of coal be purchased. These future minimum payment amounts exclude transportation surcharges that may be imposed under certain circumstances.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | We have entered into construction and equipment purchase contracts in connection with the expansion and modernization of our Oro Grande, California cement plant. We expect the
project will take at least two years to construct with actual capital expenditures occurring as the work progresses.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | We incur legal obligations for asset retirement as part of our normal operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | We pay benefits under a series of non-qualified defined benefit plans.
| | --- | ----------------------------------------------------------------------

| | (8) | We pay benefits under a health benefit plan covering approximately 600 employees and retirees of our California cement subsidiary. These employees are also covered by a qualified
defined benefit pension plan. We contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus additional amounts considered appropriate. We contributed $3.0 million in the six-month period
ended November 30, 2005.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On April 13,
2005, we announced a project to expand and modernize our Oro Grande, California cement plant. We plan to expand the Oro Grande plant to approximately 2.3 million tons of advanced dry process cement production capacity annually, and retire the
1.3 million tons of existing, but less efficient, production after the new plant is commissioned. We expect the Oro Grande project will take at least two years to construct and will cost approximately $358 million excluding capitalized interest
related to the project. We expect our capital expenditures in fiscal year 2006, including those related to the expansion and modernization of our Oro Grande cement plant, to be approximately $160 million.



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We expect cash and cash equivalents, cash from operations, proceeds from sales of our short-term
investments, available borrowings under our senior secured revolving credit facility and available distributions from our investments in life insurance contracts to be sufficient to provide funds for capital expenditure commitments (including the
expansion and modernization of our Oro Grande, California cement plant), scheduled debt payments, working capital needs and other general corporate purposes for at least the next year.



Spin-off of Chaparral.We entered into a separation and distribution agreement with Chaparral in which we each
released the other from all liabilities existing or arising from all acts and events occurring before the spin-off with respect to our respective businesses. The liabilities released or discharged do not include liabilities arising under or assigned
by the separation and distribution agreement or any ancillary agreement, such as tax liabilities and liabilities to third parties. In the separation and distribution agreement Chaparral assumed all the liabilities related to the steel business and
the transferred assets, and we and Chaparral agreed on the allocation of responsibility for certain employee benefits matters. The separation and distribution agreement also requires that each party indemnify the other against certain liabilities.
See Notes to Consolidated Financial Statements footnote entitled Legal Proceedings and Contingent Liabilities on page 16.



Cash Flows



Net cash provided by continuing operating activities was $48.7 million in the current six-month period, compared to $98.3 million in the prior year
period. The decrease resulted primarily from the utilization of tax benefits in the prior year and changes in working capital items. Accounts receivable decreased $12.0 million and inventories increased $7.7 million primarily due to normal seasonal
factors. Accounts payable and accrued expenses increased $5.1 million due to higher manufacturing cost accruals.



Net cash used for continuing investing activities was $46.5 million in the current six-month period, compared to $77.0 million in the prior year period.
Capital expenditures incurred in connection with the expansion and modernization of our Oro Grande, California cement plant were $12.0 million up $10.7 million from the prior year period. Capital expenditures for normal replacement and technological
upgrades of existing equipment and acquisitions to sustain our existing operations were $17.9 million, up $2.3 million from the prior year period. In the current year period we invested $24.5 million in auction rate securities. In the prior year
period we repaid distributions received from our investments in life insurance contracts in the amount of $51.2 million.



Net cash used for continuing financing activities was $451.2 million in the current six-month period, compared to $19.5 million provided in the prior year
period. We purchased $600 million aggregate principal amount of our 10.25% senior notes, paying $96.0 million in make-whole premiums and consent payments plus transaction costs. To fund the purchase we issued $250 million aggregate principal amount
of our new 7.25% senior notes and incurred $7.3 million in debt issuance costs, received a cash dividend of $341.1 million from Chaparral and used $112 million of cash and cash equivalents on hand.



Net cash provided by discontinued operations was $330.7 million in the
current six-month period, compared to $3.6 million in the prior year period. In connection with our refinancing and spin-off transactions, Chaparral issued $300 million aggregate principal amount of senior notes and borrowed $50 million under its
new $150 million credit facility. The net proceeds were used to pay us a dividend of $341.1 million.



OTHER ITEMS



Environmental Matters



We are subject to federal, state and local environmental laws and regulations concerning, among other matters, air emissions and wastewater discharge. We
believe we are in substantial compliance with applicable environmental laws and regulations; however, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in
violation of certain environmental laws and regulations. Based on our experience and the information currently available to us, we believe that such claims will not have a material impact on our financial condition or results of operations. Despite
our compliance and experience, it is possible that we 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 us.



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Market Risk



Historically, we have not entered into derivatives or other financial instruments for trading or speculative purposes. Our short-term investments consist
of auction rate securities that have their interest rates reset at predetermined intervals, typically less than 30 days, through an auction process. Due to the short duration between interest rate reset dates changes in market interest rates would
not have a significant impact on their fair value. We have $250 million of 7.25% fixed-rate senior notes outstanding. The fair value of the debt will vary as interest rates change.



Our operations require large amounts of energy and are dependent upon energy sources, including electricity and fossil
fuels. Prices for energy are subject to market forces largely beyond our control. In December 2005 we renegotiated three contracts for the purchase of coal for use in both cement plants and one expanded shale and clay plant in Texas. Each contract
specifies a fixed price (escalated quarterly or annually) at which we must purchase a minimum amount of coal each calendar year through 2008, and we may purchase additional amounts up to a specified maximum. We have generally not entered into any
long-term contracts to satisfy our natural gas and electricity needs. However, we continually monitor these markets and we may determine in the future to enter into long-term contracts. If we are unable to meet our requirements for fuel and
electricity, we may experience interruptions in our production. Price increases or disruption of the uninterrupted supply of these products could adversely affect our results of operations.



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 our Annual Report on Form 10-K for the year ended May 31, 2005.



New Accounting Standards.In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
No. 123R, Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB 25. Among other items, SFAS 123R eliminates the use of APB 25 and the
intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The
current effective date of SFAS 123R is the first fiscal year beginning after June 15, 2005, which will be the first quarter of our fiscal year ending May 31, 2007. We currently expect to adopt the SFAS 123R effective June 1, 2006
using the modified prospective method. Under the modified prospective method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based
payments granted after that date, and based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Financial information for periods prior to the date of adoption of SFAS 123R would not be restated.
We currently utilize a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS 123R permits entities to continue to use such a model, the standard also permits the use of a
lattice model. We have not yet determined which model we will use to measure the fair value of awards of equity instruments to employees upon the adoption of SFAS 123R.



The adoption of SFAS 123R will not have an impact on our consolidated financial position. Although the impact of SFAS 123R
on our results of operations cannot be predicted at this time, because it will depend on the number of equity awards granted in the future, as well as the model used to value the awards, it is expected to have a significant effect on our future
results of operations. However, had we adopted the requirements of SFAS 123R in prior periods, the impact would have approximated the amounts disclosed in Summary of Significant Accounting Policies  Stock-based Compensation in the Notes to
Consolidated Financial Statements.



SFAS 123R also requires
that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net
operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated, because they depend on, among other things, when employees exercise stock options.



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



In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which is effective for the Company for reporting changes in accounting principles beginning June 1, 2006. SFAS
No. 154 modifies the reporting of a change in accounting principle to require retrospective application to prior periods financial statements, unless explicit transition provisions are provided for in new accounting pronouncements or
existing pronouncements that are in the transition phase when SFAS No. 154 becomes effective.



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 our
business, the level of construction activity in our markets, abnormal periods of inclement weather, unexpected periods of equipment downtime, changes in the cost of raw materials, fuel and energy, and the impact of environmental laws and other
regulations. For further information refer to our Annual Report on Form 10-K for the year ended May 31, 2005.



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|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 16 and incorporated herein by reference.



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



Issuer Purchases of Equity Securities. The Company did not purchase any of its Common Stock on the open market during the three-month period ended
November 30, 2005. However, the Company repurchased shares of its 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.



|                                       |  |                                      |  |                                  |       |                                                                                     |     |                                                                                    |    
|-------------------------------------- |  | ------------------------------------ |  | -------------------------------- | ----- | ----------------------------------------------------------------------------------- | --- | ---------------------------------------------------------------------------------- | ---
|Period                                 |  | (a) Total Number of Shares Purchased |  | (b) Average Price Paid per Share |       | (c) Total Number of Shares Purchased as Part of PubliclyAnnounced Plans or Programs |     | (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|September 1, 2005  September 30, 2005 |  | 65,347                               |  | $                                | 54.76 |                                                                                     | N/A |                                                                                    | N/A
|October 1, 2005  October 31, 2005     |  | 1,125                                |  |                                  | 47.74 |                                                                                     | N/A |                                                                                    | N/A
|November 1, 2005  November 30, 2005   |  |                                     |  |                                  |      |                                                                                     | N/A |                                                                                    | N/A
|                                       |  |                                      |  |                                  |       |                                                                                     |     |                                                                                    |    
|Total                                  |  | 66,472                               |  | $                                | 54.64 |                                                                                     | N/A |                                                                                    | N/A
|                                       |  |                                      |  |                                  |       |                                                                                     |     |                                                                                    |    



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



The following provides information concerning the matter submitted to a vote at the Annual Meeting of Shareholders on October 18, 2005.



Proposal No. 1.Shareholders elected each of the following persons as a director of the Company for a term of
office expiring at the Annual Meeting of Shareholders in 2008.



|                   |  |                   |  |                |  |                       
|------------------ |  | ----------------- |  | -------------- |  | ----------------------
|Name               |  | Affirmative Votes |  | Negative Votes |  | Abstained or Non-voted
|Robert Alpert      |  | 20,986,079        |  | 230,647        |  | 1,655,338             
|Sam Coats          |  | 20,759,562        |  | 457,164        |  | 1,655,338             
|Thomas R. Ransdell |  | 20,760,858        |  | 455,868        |  | 1,655,338             



Terms of office expire
for the continuing directors Gordon E. Forward, Keith W. Hughes and Henry H. Mauz, Jr. in 2006 and for the continuing directors Mel G. Brekhus and Robert D. Rogers in 2007.



Item 6. Exhibits



The following exhibits are included herein:



| | (12.1) | Computation of Ratios of Earnings to Fixed Charges
| | ------ | --------------------------------------------------



| | (15.1) | Letter re: Unaudited Interim Financial Information
| | ------ | --------------------------------------------------



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



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



| | (32.1) | Section 1350 Certification of Chief Executive Officer
| | ------ | -----------------------------------------------------



| | (32.2) | Section 1350 Certification of Chief Financial Officer
| | ------ | -----------------------------------------------------



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



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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 6, 2006 |  | /s/ Richard M. Fowler                                         
|                |  | Richard M. Fowler                                             
|                |  | Executive Vice President - Finance and Chief Financial Officer
|                |  | (Principal Financial Officer)                                 
|                | 
|January 6, 2006 |  | /s/ James R. McCraw                                           
|                |  | James R. McCraw                                               
|                |  | Vice President  Accounting and Information Services          
|                |  | (Principal Accounting Officer)                                



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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            



37