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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 August 31, 2004



| ̈ | 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



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



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



There were 21,677,161 shares
of the Registrants Common Stock, $1.00 par value, outstanding as of October 4, 2004.



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INDEX



TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                              |  |                                                                                                                          |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                                          |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Financial Statements                                                                                                     |  |     
|                              |  |                                                                                                                         
|                              |  | Consolidated Balance Sheets  August 31, 2004 and May 31, 2004                                                           |  | 3   
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Operations  three months ended August 31, 2004 and August 31, 2003                           |  | 4   
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Cash Flows  three months ended August 31, 2004 and August 31, 2003                           |  | 5   
|                              |  |                                                                                                                         
|                              |  | Notes to Consolidated Financial Statements                                                                               |  | 6   
|                              |  |                                                                                                                         
|                              |  | Report of Independent Registered Public Accounting Firm                                                                  |  | 19  
|                              |  |                                                                                                                         
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 20  
|                              |  |                                                                                                                         
|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                                                                                                  |  | 25  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Legal Proceedings                                                                                                        |  | 25  
|                              |  |                                                                                                                         
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                              |  | 25  
|                              |  |                                                                                                                         
|Item 6.                       |  | Exhibits                                                                                                                 |  | 26  
|                              | 
|SIGNATURES                    |  |                                                                                                                         



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CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                        |  |                            |           |   |              |   |           |  
|--------------------------------------- |  | -------------------------- | --------- | - | ------------ | - | --------- | -
|                                        |  | (Unaudited)August 31, 2004 |           |   | May 31, 2004 |  
|In thousands                            |  |                           
|ASSETS                                  |  |                            |           |   |              |   |           |  
|CURRENT ASSETS                          |  |                            |           |   |              |   |           |  
|Cash and cash equivalents               |  | $                          | 123,777   |   |              | $ | 141,628   |  
|Accounts receivable - net               |  |                            | 214,395   |   |              |   | 211,535   |  
|Inventories                             |  |                            | 287,825   |   |              |   | 266,533   |  
|Deferred taxes and prepaid expenses     |  |                            | 35,915    |   |              |   | 34,954    |  
|                                        |  |                            |           |   |              |   |           |  
|TOTAL CURRENT ASSETS                    |  |                            | 661,912   |   |              |   | 654,650   |  
|                                        |  |                           
|OTHER ASSETS                            |  |                            |           |   |              |   |           |  
|Goodwill                                |  |                            | 146,474   |   |              |   | 146,474   |  
|Real estate and investments             |  |                            | 100,940   |   |              |   | 47,006    |  
|Deferred charges and intangibles        |  |                            | 31,548    |   |              |   | 32,354    |  
|                                        |  |                            |           |   |              |   |           |  
|                                        |  |                            | 278,962   |   |              |   | 225,834   |  
|PROPERTY, PLANT AND EQUIPMENT           |  |                            |           |   |              |   |           |  
|Land and land improvements              |  |                            | 221,387   |   |              |   | 220,812   |  
|Buildings                               |  |                            | 101,168   |   |              |   | 101,192   |  
|Machinery and equipment                 |  |                            | 1,734,046 |   |              |   | 1,733,065 |  
|Construction in progress                |  |                            | 29,947    |   |              |   | 24,405    |  
|                                        |  |                            |           |   |              |   |           |  
|                                        |  |                            | 2,086,548 |   |              |   | 2,079,474 |  
|Less depreciation and depletion         |  |                            | 1,037,619 |   |              |   | 1,015,825 |  
|                                        |  |                            |           |   |              |   |           |  
|                                        |  |                            | 1,048,929 |   |              |   | 1,063,649 |  
|                                        |  |                            |           |   |              |   |           |  
|                                        |  | $                          | 1,989,803 |   |              | $ | 1,944,133 |  
|                                        |  |                            |           |   |              |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY    |  |                            |           |   |              |   |           |  
|CURRENT LIABILITIES                     |  |                            |           |   |              |   |           |  
|Accounts payable                        |  | $                          | 118,443   |   |              | $ | 108,557   |  
|Accrued interest, wages and other items |  |                            | 65,607    |   |              |   | 78,699    |  
|Current portion of long-term debt       |  |                            | 696       |   |              |   | 699       |  
|                                        |  |                            |           |   |              |   |           |  
|TOTAL CURRENT LIABILITIES               |  |                            | 184,746   |   |              |   | 187,955   |  
|                                        |  |                           
|LONG-TERM DEBT                          |  |                            | 607,640   |   |              |   | 598,412   |  
|                                        |  |                           
|CONVERTIBLE SUBORDINATED DEBENTURES     |  |                            | 199,937   |   |              |   | 199,937   |  
|                                        |  |                           
|DEFERRED INCOME TAXES AND OTHER CREDITS |  |                            | 198,333   |   |              |   | 195,845   |  
|                                        |  |                           
|SHAREHOLDERS EQUITY                    |  |                            |           |   |              |   |           |  
|Common stock, $1 par value              |  |                            | 25,067    |   |              |   | 25,067    |  
|Additional paid-in capital              |  |                            | 262,105   |   |              |   | 261,455   |  
|Retained earnings                       |  |                            | 602,879   |   |              |   | 568,596   |  
|Cost of common stock in treasury        |  |                            | (86,422   | ) |              |   | (88,652   | )
|Pension liability adjustment            |  |                            | (4,482    | ) |              |   | (4,482    | )
|                                        |  |                            |           |   |              |   |           |  
|                                        |  |                            | 799,147   |   |              |   | 761,984   |  
|                                        |  |                            |           |   |              |   |           |  
|                                        |  | $                          | 1,989,803 |   |              | $ | 1,944,133 |  
|                                        |  |                            |           |   |              |   |           |  



See notes to consolidated financial
statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                             |  |                              |         |   |      |   |         |  
|------------------------------------------------------------ |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                             |  | Three months endedAugust 31, |        
|In thousands except per share                                |  | 2004                         |         |   | 2003 |  
|NET SALES                                                    |  | $                            | 499,854 |   |      | $ | 376,038 |  
|                                                             |  |                             
|COSTS AND EXPENSES (INCOME)                                  |  |                              |         |   |      |   |         |  
|Cost of products sold                                        |  |                              | 405,968 |   |      |   | 352,655 |  
|Selling, general and administrative                          |  |                              | 26,564  |   |      |   | 25,603  |  
|Interest                                                     |  |                              | 17,061  |   |      |   | 19,791  |  
|Loss on early retirement of debt                             |  |                              |        |   |      |   | 11,246  |  
|Other income                                                 |  |                              | (3,545  | ) |      |   | (6,196  | )
|                                                             |  |                              |         |   |      |   |         |  
|                                                             |  |                              | 446,048 |   |      |   | 403,099 |  
|                                                             |  |                              |         |   |      |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES AND                        |  |                              |         |   |      |   |         |  
|ACCOUNTING CHANGE                                            |  |                              | 53,806  |   |      |   | (27,061 | )
|                                                             |  |                             
|Income taxes (benefit)                                       |  |                              | 17,923  |   |      |   | (12,427 | )
|                                                             |  |                              |         |   |      |   |         |  
|INCOME (LOSS) BEFORE ACCOUNTING CHANGE                       |  |                              | 35,883  |   |      |   | (14,634 | )
|                                                             |  |                             
|Cumulative effect of accounting change - net of income taxes |  |                              |        |   |      |   | (1,071  | )
|                                                             |  |                              |         |   |      |   |         |  
|NET INCOME (LOSS)                                            |  | $                            | 35,883  |   |      | $ | (15,705 | )
|                                                             |  |                              |         |   |      |   |         |  
|Basic earnings (loss) per share                              |  |                              |         |   |      |   |         |  
|Income (loss) before accounting change                       |  | $                            | 1.68    |   |      | $ | (.69    | )
|Cumulative effect of accounting change                       |  |                              |        |   |      |   | (.05    | )
|                                                             |  |                              |         |   |      |   |         |  
|Net income (loss)                                            |  | $                            | 1.68    |   |      | $ | (.74    | )
|                                                             |  |                              |         |   |      |   |         |  
|Diluted earnings (loss) per share                            |  |                              |         |   |      |   |         |  
|Income (loss) before accounting change                       |  | $                            | 1.51    |   |      | $ | (.69    | )
|Cumulative effect of accounting change                       |  |                              |        |   |      |   | (.05    | )
|                                                             |  |                              |         |   |      |   |         |  
|Net income (loss)                                            |  | $                            | 1.51    |   |      | $ | (.74    | )
|                                                             |  |                              |         |   |      |   |         |  
|Average shares outstanding                                   |  |                              |         |   |      |   |         |  
|Basic                                                        |  |                              | 21,356  |   |      |   | 21,146  |  
|Diluted                                                      |  |                              | 24,992  |   |      |   | 21,146  |  
|                                                             |  |                              |         |   |      |   |         |  
|Cash dividends per share                                     |  | $                            | .075    |   |      | $ | .075    |  
|                                                             |  |                              |         |   |      |   |         |  



See notes to consolidated financial
statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                       |  |                              |         |   |      |   |          |  
|------------------------------------------------------ |  | ---------------------------- | ------- | - | ---- | - | -------- | -
|                                                       |  | Three months endedAugust 31, |        
|In thousands                                           |  | 2004                         |         |   | 2003 |  
|OPERATING ACTIVITIES                                   |  |                              |         |   |      |   |          |  
|Net income (loss)                                      |  | $                            | 35,883  |   |      | $ | (15,705  | )
|Adjustments to reconcile net income (loss) to net cash |  |                              |         |   |      |   |          |  
|Cumulative effect of accounting change                 |  |                              |        |   |      |   | 1,071    |  
|Loss on early retirement of debt                       |  |                              |        |   |      |   | 11,246   |  
|Gain on disposal of assets                             |  |                              | (1,760  | ) |      |   | (1,361   | )
|Depreciation, depletion and amortization               |  |                              | 23,675  |   |      |   | 24,127   |  
|Deferred taxes (benefit)                               |  |                              | 10,336  |   |      |   | (12,607  | )
|Other - net                                            |  |                              | (130    | ) |      |   | 957      |  
|Changes in operating assets and liabilities            |  |                              |         |   |      |   |          |  
|Receivables repurchased                                |  |                              |        |   |      |   | (115,514 | )
|Accounts receivable - net                              |  |                              | (2,926  | ) |      |   | (2,542   | )
|Inventories and prepaid expenses                       |  |                              | (21,982 | ) |      |   | 14,346   |  
|Accounts payable and accrued liabilities               |  |                              | (752    | ) |      |   | 10,660   |  
|Other credits                                          |  |                              | 1,510   |   |      |   | 1,819    |  
|                                                       |  |                              |         |   |      |   |          |  
|Net cash provided (used) by operations                 |  |                              | 43,854  |   |      |   | (83,503  | )
|                                                       |  |                             
|INVESTING ACTIVITIES                                   |  |                              |         |   |      |   |          |  
|Capital expenditures                                   |  |                              | (9,245  | ) |      |   | (7,497   | )
|Proceeds from disposal of assets                       |  |                              | 2,137   |   |      |   | 1,806    |  
|Investments in life insurance contracts                |  |                              | (53,829 | ) |      |   | (519     | )
|Other - net                                            |  |                              | (1,934  | ) |      |   | (1,224   | )
|                                                       |  |                              |         |   |      |   |          |  
|Net cash used by investing                             |  |                              | (62,871 | ) |      |   | (7,434   | )
|                                                       |  |                             
|FINANCING ACTIVITIES                                   |  |                              |         |   |      |   |          |  
|Long-term borrowings                                   |  |                              |        |   |      |   | 717,731  |  
|Debt retirements                                       |  |                              | (5      | ) |      |   | (591,236 | )
|Debt issuance costs                                    |  |                              |        |   |      |   | (15,834  | )
|Debt retirement costs                                  |  |                              |        |   |      |   | (8,505   | )
|Common dividends paid                                  |  |                              | (1,600  | ) |      |   | (1,581   | )
|Other - net                                            |  |                              | 2,771   |   |      |   | (490     | )
|                                                       |  |                              |         |   |      |   |          |  
|Net cash provided by financing                         |  |                              | 1,166   |   |      |   | 100,085  |  
|                                                       |  |                              |         |   |      |   |          |  
|Increase (decrease) in cash and cash equivalents       |  |                              | (17,851 | ) |      |   | 9,148    |  
|                                                       |  |                             
|Cash and cash equivalents at beginning of period       |  |                              | 141,628 |   |      |   | 6,204    |  
|                                                       |  |                              |         |   |      |   |          |  
|Cash and cash equivalents at end of period             |  | $                            | 123,777 |   |      | $ | 15,352   |  
|                                                       |  |                              |         |   |      |   |          |  



See notes to consolidated financial
statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



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



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 three-month period ended August 31, 2004, are not necessarily indicative of the results that may be expected for the year ended May 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended May 31, 2004.



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



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



Cash and Cash Equivalents. Investments with maturities of less than 90 days when purchased are classified as cash equivalents and consist primarily
of money market funds and investment grade commercial paper issued by major corporations and financial institutions. Cash and cash equivalents includes $26.7 million used to support letters of credit.



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



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



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



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.



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Property, plant and equipment is recorded at cost. Provisions for depreciation are computed generally
using the straight-line method. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. Useful lives for the Companys primary operating facilities range from 10 to 20
years. Maintenance and repairs are charged to expense as incurred. Costs incurred for scheduled shut-downs to refurbish the Steel facilities are amortized over the benefited period, typically 12 to 24 months.



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



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



Investments are composed primarily of life insurance contracts that may be used to fund certain Company benefit agreements. The contracts, recorded at
their net cash surrender value, totaled $88.2 million (net of distributions of $1.3 million) at August 31, 2004 and $34.2 million (net of distributions of $52.5 million) at May 31, 2004. During the August 2004 quarter distributed amounts totaling
$51.2 million were repaid. Charges incurred on the distributions of $100,000 and $900,000 in the three-month periods ended August 31, 2004 and 2003, respectively, were included in interest expense.



Deferred Charges and Intangibles.Deferred charges are composed
primarily of debt issuance costs that totaled $19.1 million and $19.7 million at August 31, 2004 and May 31, 2004, respectively. The costs are associated with various debt issues and amortized over the term of the related debt.



Intangibles are composed of non-compete agreements and other intangibles with
finite lives being amortized on a straight-line basis over periods of 5 to 15 years. Their carrying value, adjusted for write-offs, totaled $2.0 million (net of accumulated amortization of $2.6 million) at August 31, 2004 and $2.1 million (net of
accumulated amortization of $3.8 million) at May 31, 2004. Amortization expense incurred was $100,000 in both three-month periods ended August 31, 2004 and 2003. Estimated amortization expense for each of the five succeeding years is $400,000 in
2005 and $300,000 per year thereafter.



Other Credits.Other credits of $60.4 million at August 31, 2004 and $68.5 million at May 31, 2004 are composed primarily of liabilities related to the Companys retirement plans, deferred compensation agreements and asset retirement obligations.



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



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



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



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



|                               |  |                              |       |   |      |   |       |  
|------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                               |  | Three months endedAugust 31, |      
|In thousands                   |  | 2004                         |       |   | 2003 |  
|Balance at beginning of period |  | $                            | 4,992 |   |      | $ |      |  
|Initial obligation             |  |                              |      |   |      |   | 4,092 |  
|Accretion expense              |  |                              | 90    |   |      |   | 69    |  
|Settlements                    |  |                              | (105  | ) |      |   | (101  | )
|                               |  |                              |       |   |      |   |       |  
|Balance at end of period       |  | $                            | 4,977 |   |      | $ | 4,060 |  
|                               |  |                              |       |   |      |   |       |  



Pension Liability
Adjustment.The pension liability adjustment to shareholders equity of $4.5 million at both August 31, 2004 and May 31, 2004 (net of tax of $2.4 million) relates to a defined benefit retirement plan covering approximately 600 employees and
retirees of an acquired subsidiary. Comprehensive income or loss consists of net income or loss and the pension liability adjustment to shareholders equity. Comprehensive income (loss) was the same as net income (loss) for the three-month
periods ended August 31, 2004 and 2003.



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



Other
Income.Other income includes routine sales of surplus operating assets and real estate resulting in gains of $1.8 million and $1.4 million in the three-month periods ended August 31, 2004 and 2003, respectively. Also included in other income
was $4.2 million resulting from the Companys litigation against certain graphite electrode suppliers in the three-month period ended August 31, 2003.



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



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



Contingently issuable shares relate to deferred compensation agreements in which directors elected to defer annual and meeting fees or executives elected
to defer incentive compensation and vested shares under the Companys former stock awards program. The deferred compensation is denominated in shares of the Companys common stock and issued upon retirement or at such earlier date as
approved by the Company. The shares are considered contingently issuable because the director or executive has an unconditional right to the shares to be issued. Vested stock award shares are issued in the year in which the employee reaches age 60.



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



Basic and
Diluted EPS are calculated as follows:



|                                                    |  |                              |        |      |   |         |  
|--------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------- | -
|                                                    |  | Three months endedAugust 31, |       
|In thousands except per share                       |  | 2004                         |        | 2003 |  
|Earnings                                            |  |                              |        |      |   |         |  
|Income (loss) before accounting change              |  | $                            | 35,883 |      | $ | (14,634 | )
|Cumulative effect of accounting change              |  |                              |       |      |   | (1,071  | )
|                                                    |  |                              |        |      |   |         |  
|Net income (loss)                                   |  | $                            | 35,883 |      | $ | (15,705 | )
|                                                    |  |                              |        |      |   |         |  
|Shares                                              |  |                              |        |      |   |         |  
|Weighted-average shares outstanding                 |  |                              | 21,290 |      |   | 21,074  |  
|Contingently issuable shares                        |  |                              | 66     |      |   | 72      |  
|                                                    |  |                              |        |      |   |         |  
|Basic weighted-average shares                       |  |                              | 21,356 |      |   | 21,146  |  
|                                                    |  |                             
|Convertible subordinated debentures                 |  |                              | 2,888  |      |   |        |  
|Stock option and award dilution                     |  |                              | 748    |      |   |        |  
|                                                    |  |                              |        |      |   |         |  
|Diluted weighted-average shares*                    |  |                              | 24,992 |      |   | 21,146  |  
|                                                    |  |                              |        |      |   |         |  
|Basic earnings (loss) per share                     |  |                              |        |      |   |         |  
|Income (loss) before accounting change              |  | $                            | 1.68   |      | $ | (.69    | )
|Cumulative effect of accounting change              |  |                              |       |      |   | (.05    | )
|                                                    |  |                              |        |      |   |         |  
|Net income (loss)                                   |  | $                            | 1.68   |      | $ | (.74    | )
|                                                    |  |                              |        |      |   |         |  
|Diluted earnings (loss) per share                   |  |                              |        |      |   |         |  
|Income (loss) before accounting change              |  | $                            | 1.51   |      | $ | (.69    | )
|Cumulative effect of accounting change              |  |                              |       |      |   | (.05    | )
|                                                    |  |                              |        |      |   |         |  
|Net income (loss)                                   |  | $                            | 1.51   |      | $ | (.74    | )
|                                                    |  |                              |        |      |   |         |  
|*        Shares excluded due to antidilutive effect |  |                              |        |      |   |         |  
|Convertible subordinated debentures                 |  |                              |       |      |   | 2,888   |  
|Stock options and awards                            |  |                              | 519    |      |   | 3,292   |  



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



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



|                                                                                                          |  |                              |        |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                                          |  | Three months endedAugust 31, |       
|In thousands except per share                                                                             |  | 2004                         |        |   | 2003 |  
|Net income (loss)                                                                                         |  |                              |        |   |      |   |         |  
|As reported                                                                                               |  | $                            | 35,883 |   |      | $ | (15,705 | )
|Plus: stock-based compensation included in the determination of net income (loss) as reported, net of tax |  |                              | 452    |   |      |   | 27      |  
|Less: fair value of stock-based compensation, net of tax                                                  |  |                              | (1,262 | ) |      |   | (968    | )
|                                                                                                          |  |                              |        |   |      |   |         |  
|Pro forma                                                                                                 |  | $                            | 35,073 |   |      | $ | (16,646 | )
|                                                                                                          |  |                              |        |   |      |   |         |  
|Basic earnings (loss) per share                                                                           |  |                              |        |   |      |   |         |  
|As reported                                                                                               |  | $                            | 1.68   |   |      | $ | (.74    | )
|Pro forma                                                                                                 |  |                              | 1.64   |   |      |   | (.79    | )
|                                                                                                          |  |                             
|Diluted earnings (loss) per share                                                                         |  |                              |        |   |      |   |         |  
|As reported                                                                                               |  | $                            | 1.51   |   |      | $ | (.74    | )
|Pro forma                                                                                                 |  |                              | 1.47   |   |      |   | (.79    | )



WORKING CAPITAL



Working capital totaled $477.2
million at August 31, 2004, compared to $466.7 million at May 31, 2004.



Accounts receivable are presented net of allowances for doubtful receivables of $3.9 million at August 31, 2004 and $5.3 million at May 31, 2004. Provisions for bad debts charged to expense were $300,000 and $2.3 million in the three-month
periods ended August 31, 2004 and 2003, respectively. Uncollectible accounts written off amounted to $1.7 million and $300,000 in the three-month periods ended August 31, 2004 and 2003, respectively.



Inventories consist of:



|                           |  |                |         |             |   |        
|-------------------------- |  | -------------- | ------- | ----------- | - | -------
|In thousands               |  | August 31,2004 |         | May 31,2004
|Finished products          |  | $              | 100,743 |             | $ | 86,395 
|Work in process            |  |                | 57,439  |             |   | 56,440 
|Raw materials and supplies |  |                | 129,643 |             |   | 123,698
|                           |  |                |         |             |   |        
|                           |  | $              | 287,825 |             | $ | 266,533
|                           |  |                |         |             |   |        



Inventories are stated
at cost (not in excess of market) primarily using the last-in, first-out (LIFO) method. If the average cost method (which approximates current replacement cost) had been used, inventory values would have been higher by $52.6 million at
August 31, 2004 and $49.7 million at May 31, 2004.



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Accrued interest, wages and other items consist of:



|                         |  |                |        |             |   |       
|------------------------ |  | -------------- | ------ | ----------- | - | ------
|In thousands             |  | August 31,2004 |        | May 31,2004
|Interest                 |  | $              | 13,547 |             | $ | 28,412
|Employee compensation    |  |                | 21,324 |             |   | 27,142
|Income taxes             |  |                | 6,290  |             |   | 686   
|Property taxes and other |  |                | 24,446 |             |   | 22,459
|                         |  |                |        |             |   |       
|                         |  | $              | 65,607 |             | $ | 78,699
|                         |  |                |        |             |   |       



LONG-TERM DEBT



Long-term debt is comprised of the
following:



|                                                                             |  |                |         |   |             |   |         |  
|---------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------- | - | ------- | -
|In thousands                                                                 |  | August 31,2004 |         |   | May 31,2004 |  
|Senior secured credit facility expiring in 2007                              |  | $              |        |   |             | $ |        |  
|Senior notes due in 2011, interest rate 10.25%                               |  |                | 600,000 |   |             |   | 600,000 |  
|Interest rate swaps                                                          |  |                |         |   |             |   |         |  
|Fair value adjustment                                                        |  |                | (3,054  | ) |             |   | (12,570 | )
|Unamortized gains on termination                                             |  |                | 7,814   |   |             |   | 8,102   |  
|Pollution control bonds due through 2007, interest rate 3.38% (75% of prime) |  |                | 3,175   |   |             |   | 3,175   |  
|Other                                                                        |  |                | 401     |   |             |   | 404     |  
|                                                                             |  |                |         |   |             |   |         |  
|                                                                             |  |                | 608,336 |   |             |   | 599,111 |  
|Less current maturities                                                      |  |                | 696     |   |             |   | 699     |  
|                                                                             |  |                |         |   |             |   |         |  
|                                                                             |  | $              | 607,640 |   |             | $ | 598,412 |  
|                                                                             |  |                |         |   |             |   |         |  



Maturities of
long-term debt for each of the five succeeding years are $700,000 per year through 2007, $1.1 million for 2008 and none for 2009.



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



No borrowings were outstanding under the facility at August 31, 2004;
however, $26.7 million of the facility was utilized to support letters of credit. Borrowings under the facility are limited based on the net amounts of eligible accounts receivable. In addition, there is the requirement to meet certain financial
tests and to maintain certain financial ratios if the excess availability under the facility falls below $30 million, including maintaining a fixed charge coverage ratio and meeting a minimum tangible net worth test.



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



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



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Senior Notes.The senior notes represent general unsecured senior obligations of the Company. The
terms of the notes contain covenants that among other things provide for restrictions on the payment of dividends or repurchasing common stock, making certain investments, incurring additional debt or selling preferred stock, creating liens, and
transferring assets. The Company is also required to reinvest through capital expenditures the net proceeds from asset sales within 360 days of their receipt. To the extent that the amount not reinvested exceeds $10 million, the Company must make an
offer to all note holders to purchase the maximum principal amount of notes that may be purchased out of the remaining proceeds at an offer price equal to 100% of principal amount plus accrued and unpaid interest and liquidated damages, if any, to
the date of purchase. The Company has a requirement to reinvest through capital expenditures approximately $15.4 million prior to February 2005. These capital expenditures may be funded, if necessary, from borrowings under the Companys
long-term senior secured credit facility. At any time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 110.25% of the principal amount thereof, plus accrued interest,
with the net cash proceeds from certain equity offerings. In addition, at any time on or prior to June 15, 2007, the Company may redeem all or part of the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued
interest and a make-whole premium. After June 15, 2007, the Company may redeem all or a part of the notes at a redemption price of 105.125% in 2007, 102.563% in 2008 and 100% in 2009 and thereafter.



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



The amount of interest paid was $33.8
million and $6.4 million in the three-month periods ended August 31, 2004 and 2003, respectively. No interest was capitalized in either of the three-month periods ended August 31, 2004 and 2003.



CONVERTIBLE SUBORDINATED DEBENTURES



On June 5, 1998, the Company issued $206.2 million aggregate principal
amount of 5.5% convertible subordinated debentures due June 30, 2028 (the Debentures). TXI Capital Trust I (the Trust), a Delaware business trust 100% owned by the Company, issued 4,000,000 of its 5.5% Shared Preference
Redeemable Securities (Preferred Securities) to the public for gross proceeds of $200 million. The combined proceeds from the issuance of the Preferred Securities and the issuance to the Company of the common securities of the Trust were
invested by the Trust in the Debentures. At August 31, 2004, 3,998,744 Preferred Securities representing an undivided beneficial interest in $199.9 million of the $206.1 million aggregate principal amount of Debentures issued were outstanding.



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



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



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SHAREHOLDERS EQUITY



Common stock consists of:



|                                            |  |                 |  |             
|------------------------------------------- |  | --------------- |  | ------------
|                                            |  | August 31, 2004 |  | May 31, 2004
|In thousands                                |  |                
|Shares authorized                           |  | 40,000          |  | 40,000      
|Shares outstanding                          |  | 21,369          |  | 21,201      
|Shares held in treasury                     |  | 3,698           |  | 3,866       
|Shares reserved for stock options and other |  | 2,957           |  | 3,182       



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



STOCK OPTION PLAN



The Companys stock option plan as approved by shareholders provided that non-qualified and incentive stock options to purchase Common Stock may be
granted to directors, officers and key employees at market prices at date of grant. Outstanding options become exercisable in installments beginning one year after date of grant and expire ten years later.



A summary of option transactions for the three-month period ended August 31,
2004, follows:



|                               |  |                     |   |  |                               |      
|------------------------------ |  | ------------------- | - |  | ----------------------------- | -----
|                               |  | Shares Under Option |   |  | Weighted-Average Option Price
|Outstanding at May 31, 2004    |  | 3,102,268           |   |  | $                             | 28.89
|Exercised                      |  | (216,372            | ) |  |                               | 21.66
|Canceled                       |  | (5,500              | ) |  |                               | 29.90
|                               |  |                     |   |  |                               |      
|Outstanding at August 31, 2004 |  | 2,880,396           |   |  | $                             | 29.43
|                               |  |                     |   |  |                               |      



There were 1,807,756
shares exercisable at August 31, 2004. Outstanding options expire on various dates to May 15, 2013.



INCOME TAXES



Federal income taxes for the interim periods ended August 31, 2004 and August 31, 2003, have been included in the accompanying financial statements on the
basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense. Applying these differences to the estimated
current year pretax income resulted in an estimated annualized effective tax rate for 2004 of 33.3% compared to 45.3% for 2003. The tax benefit attributed to cumulative effect of accounting change in 2003 is based on the incremental tax rate of 35%.
The Company made no income tax payments in the three-month period ended August 31, 2004, and income tax payments of $700,000 in the three-month period ended August 31, 2003.



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LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES



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



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



RETIREMENT PLANS



Approximately 600 employees
and retirees of Riverside Cement Company are covered by a defined benefit pension plan and a postretirement health benefit plan. The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and
expenses in the three-month periods ended August 31, 2004 and 2003, are as follows:



|                                   |  |                 |      |   |                |   |      |      |  |   |      |   |  |   |     |  
|---------------------------------- |  | --------------- | ---- | - | -------------- | - | ---- | ---- |  | - | ---- | - |  | - | --- | -
|                                   |  | Pension Benefit |      |   | Health Benefit |  
|In thousands                       |  | 2004            |      |   | 2003           |   |      | 2004 |  |   | 2003 |  
|Service cost                       |  | $               | 109  |   |                | $ | 229  |      |  | $ | 23   |   |  | $ | 67  |  
|Interest cost                      |  |                 | 644  |   |                |   | 591  |      |  |   | 123  |   |  |   | 192 |  
|Expected return on plan assets     |  |                 | (610 | ) |                |   | (503 | )    |  |   |     |   |  |   |    |  
|Amortization of prior service cost |  |                 |     |   |                |   |     |      |  |   | (211 | ) |  |   | (86 | )
|Amortization of net actuarial loss |  |                 | 125  |   |                |   | 233  |      |  |   | 226  |   |  |   | 210 |  
|                                   |  |                 |      |   |                |   |      |      |  |   |      |   |  |   |     |  
|                                   |  | $               | 268  |   |                | $ | 550  |      |  | $ | 161  |   |  | $ | 383 |  
|                                   |  |                 |      |   |                |   |      |      |  |   |      |   |  |   |     |  



The U.S. Medicare
Prescription Drug Improvement and Modernization Act of 2003 provides a new federal prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health benefit plans that provide a benefit that meets certain criteria.
The Companys postretirement health benefit plan currently provides certain prescription drug benefits to eligible participants. Financial Accounting Standards Board Staff Position No. 106-2, Accounting and Disclosure Requirements Related
to the Medicare Prescription Drug Improvement and Modernization Act of 2003 is effective for the first interim period beginning after June 15, 2004, and provides that an employer shall measure the accumulated plan benefit obligation and net
periodic postretirement benefit cost taking into account any subsidy received under the Act. The Company does not expect that the adoption of FASB Staff Position No. 106-2 will have a material impact on the financial statements of the Company.



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



Life insurance contracts have been purchased that may be used to fund the FSP
payments. These insurance contracts, recorded at their net cash surrender value, totaled $88.2 million (net of distributions of $1.3 million) at August 31, 2004.



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The amount of FSP benefit expense charged to costs and expenses in the three-month periods ended August
31, 2004 and 2003, are as follows:



|                                  |  |             |      |   |      |   |      |  
|--------------------------------- |  | ----------- | ---- | - | ---- | - | ---- | -
|                                  |  | FSP Benefit |     
|In thousands                      |  | 2004        |      |   | 2003 |  
|Service cost                      |  | $           | 572  |   |      | $ | 515  |  
|Interest cost                     |  |             | 469  |   |      |   | 463  |  
|Amortization of transition amount |  |             | 45   |   |      |   | 47   |  
|Recognized actuarial gain         |  |             |     |   |      |   | (14  | )
|Participant contributions         |  |             | (136 | ) |      |   | (134 | )
|                                  |  |             |      |   |      |   |      |  
|                                  |  | $           | 950  |   |      | $ | 877  |  
|                                  |  |             |      |   |      |   |      |  



BUSINESS SEGMENTS



The Company has two reportable
segments: cement, aggregate and concrete products (the CAC segment) and steel (the Steel segment). The Companys reportable segments are strategic business units that offer different products and services. They are
managed separately because of significant differences in manufacturing processes, distribution and markets served. Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, ready-mix concrete, expanded shale and clay
aggregate, and other products. Through the Steel segment, the Company produces and sells structural steel, piling products, special bar quality products, merchant bar quality rounds, reinforcing bar and channels. Operating profit is net sales less
operating costs and expenses, excluding general corporate expenses and interest expense. Operating results and certain other financial data for the Companys business segments are presented on pages 20 and 21 under Business Segments
of Managements Discussion and Analysis of Financial Condition and Results of Operations, and are incorporated herein by reference.



CONDENSED CONSOLIDATING FINANCIAL INFORMATION



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



The Companys accounts receivable subsidiary was established in March
1999 to facilitate the Companys agreement to sell, on a revolving basis, an undivided interest in a defined pool of trade receivables. At May 31, 2003, the subsidiary had total assets of $54.1 million. However, on June 6, 2003, in connection
with the issuance of the senior notes, the Company repurchased the entire outstanding interest in the defined pool of trade receivables previously sold and terminated the agreement to sell trade receivables. The repurchased trade receivables were
subsequently transferred to the respective operating entities. Effective May 27, 2004, the subsidiary was merged into the parent company.



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



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|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|-------------------------------------------------------- |  | ---------------------- | --------- | ---------------------- | - | --------------------------- |  | ------------------- | - |  | ------------ | ---------- | - |  | - | ---------
|In thousands                                             |  | Texas Industries, Inc. |           | Guarantor Subsidiaries |   | Non- Guarantor Subsidiaries |  | Eliminating Entries |   |  | Consolidated
|                                                        
|Condensed consolidating balance sheet at August 31, 2004
|                                                         |  |                        |           |                        |  
|Cash and cash equivalents                                |  | $                      | 118,905   |                        | $ | 4,872                       |  | $                   |  |  | $            |           |   |  | $ | 123,777  
|Accounts receivable - net                                |  |                        |          |                        |   | 214,395                     |  |                     |  |  |              |           |   |  |   | 214,395  
|Inventories                                              |  |                        |          |                        |   | 287,825                     |  |                     |  |  |              |           |   |  |   | 287,825  
|Deferred taxes and prepaid expenses                      |  |                        | 214       |                        |   | 35,701                      |  |                     |  |  |              |           |   |  |   | 35,915   
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total current assets                                     |  |                        | 119,119   |                        |   | 542,793                     |  |                     |  |  |              |           |   |  |   | 661,912  
|Goodwill                                                 |  |                        |          |                        |   | 146,474                     |  |                     |  |  |              |           |   |  |   | 146,474  
|Real estate and investments                              |  |                        |          |                        |   | 100,940                     |  |                     |  |  |              |           |   |  |   | 100,940  
|Deferred charges and intangibles                         |  |                        | 19,091    |                        |   | 12,457                      |  |                     |  |  |              |           |   |  |   | 31,548   
|Deferred income taxes                                    |  |                        | 34,035    |                        |   |                            |  |                     |  |  |              | (34,035    | ) |  |   |         
|Investment in subsidiaries                               |  |                        | 1,129,677 |                        |   |                            |  |                     |  |  |              | (1,129,677 | ) |  |   |         
|Intercompany receivables                                 |  |                        | 841,491   |                        |   | 507,662                     |  |                     |  |  |              | (1,349,153 | ) |  |   |         
|Property, plant and equipment - net                      |  |                        |          |                        |   | 1,049,437                   |  |                     |  |  |              | (508       | ) |  |   | 1,048,929
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total assets                                             |  | $                      | 2,143,413 |                        | $ | 2,359,763                   |  | $                   |  |  | $            | (2,513,373 | ) |  | $ | 1,989,803
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Accounts payable                                         |  | $                      | 35        |                        | $ | 118,408                     |  | $                   |  |  | $            |           |   |  | $ | 118,443  
|Accrued interest, wages and other items                  |  |                        | 19,397    |                        |   | 46,210                      |  |                     |  |  |              |           |   |  |   | 65,607   
|Current portion of long-term debt                        |  |                        | 680       |                        |   | 16                          |  |                     |  |  |              |           |   |  |   | 696      
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total current liabilities                                |  |                        | 20,112    |                        |   | 164,634                     |  |                     |  |  |              |           |   |  |   | 184,746  
|Intercompany payables                                    |  |                        | 507,662   |                        |   | 841,491                     |  |                     |  |  |              | (1,349,153 | ) |  |   |         
|Long-term debt                                           |  |                        | 607,255   |                        |   | 385                         |  |                     |  |  |              |           |   |  |   | 607,640  
|Convertible subordinated debentures                      |  |                        | 199,937   |                        |   |                            |  |                     |  |  |              |           |   |  |   | 199,937  
|Deferred income taxes and other credits                  |  |                        | 4,818     |                        |   | 227,704                     |  |                     |  |  |              | (34,189    | ) |  |   | 198,333  
|Shareholders equity                                     |  |                        | 803,629   |                        |   | 1,125,549                   |  |                     |  |  |              | (1,130,031 | ) |  |   | 799,147  
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total liabilities and shareholders equity               |  | $                      | 2,143,413 |                        | $ | 2,359,763                   |  | $                   |  |  | $            | (2,513,373 | ) |  | $ | 1,989,803
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|                                                        
|Condensed consolidating balance sheet at May 31, 2004   
|                                                         |  |                        |           |                        |  
|Cash and cash equivalents                                |  | $                      | 134,813   |                        | $ | 6,815                       |  | $                   |  |  | $            |           |   |  | $ | 141,628  
|Accounts receivable - net                                |  |                        |          |                        |   | 211,535                     |  |                     |  |  |              |           |   |  |   | 211,535  
|Inventories                                              |  |                        |          |                        |   | 266,533                     |  |                     |  |  |              |           |   |  |   | 266,533  
|Deferred taxes and prepaid expenses                      |  |                        | 37        |                        |   | 34,917                      |  |                     |  |  |              |           |   |  |   | 34,954   
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total current assets                                     |  |                        | 134,850   |                        |   | 519,800                     |  |                     |  |  |              |           |   |  |   | 654,650  
|Goodwill                                                 |  |                        |          |                        |   | 146,474                     |  |                     |  |  |              |           |   |  |   | 146,474  
|Real estate and investments                              |  |                        |          |                        |   | 47,006                      |  |                     |  |  |              |           |   |  |   | 47,006   
|Deferred charges and intangibles                         |  |                        | 21,687    |                        |   | 10,667                      |  |                     |  |  |              |           |   |  |   | 32,354   
|Deferred income taxes                                    |  |                        | 32,053    |                        |   |                            |  |                     |  |  |              | (32,053    | ) |  |   |         
|Investment in subsidiaries                               |  |                        | 1,083,377 |                        |   |                            |  |                     |  |  |              | (1,083,377 | ) |  |   |         
|Intercompany receivables                                 |  |                        | 765,806   |                        |   | 429,398                     |  |                     |  |  |              | (1,195,204 | ) |  |   |         
|Property, plant and equipment - net                      |  |                        |          |                        |   | 1,064,157                   |  |                     |  |  |              | (508       | ) |  |   | 1,063,649
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total assets                                             |  | $                      | 2,037,773 |                        | $ | 2,217,502                   |  | $                   |  |  | $            | (2,311,142 | ) |  | $ | 1,944,133
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Accounts payable                                         |  | $                      | 35        |                        | $ | 108,522                     |  | $                   |  |  | $            |           |   |  | $ | 108,557  
|Accrued interest, wages and other items                  |  |                        | 29,088    |                        |   | 49,611                      |  |                     |  |  |              |           |   |  |   | 78,699   
|Current portion of long-term debt                        |  |                        | 680       |                        |   | 19                          |  |                     |  |  |              |           |   |  |   | 699      
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total current liabilities                                |  |                        | 29,803    |                        |   | 158,152                     |  |                     |  |  |              |           |   |  |   | 187,955  
|Intercompany payables                                    |  |                        | 429,398   |                        |   | 765,806                     |  |                     |  |  |              | (1,195,204 | ) |  |   |         
|Long-term debt                                           |  |                        | 598,027   |                        |   | 385                         |  |                     |  |  |              |           |   |  |   | 598,412  
|Convertible subordinated debentures                      |  |                        | 199,937   |                        |   |                            |  |                     |  |  |              |           |   |  |   | 199,937  
|Deferred income taxes and other credits                  |  |                        | 14,142    |                        |   | 213,910                     |  |                     |  |  |              | (32,207    | ) |  |   | 195,845  
|Shareholders equity                                     |  |                        | 766,466   |                        |   | 1,079,249                   |  |                     |  |  |              | (1,083,731 | ) |  |   | 761,984  
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          
|Total liabilities and shareholders equity               |  | $                      | 2,037,773 |                        | $ | 2,217,502                   |  | $                   |  |  | $            | (2,311,142 | ) |  | $ | 1,944,133
|                                                         |  |                        |           |                        |   |                             |  |                     |   |  |              |            |   |  |   |          



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##### Table of Contents

|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|-------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |         |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  |   | EliminatingEntries |   |  | Consolidated |        
|                                                                                      
|Condensed consolidating statement of operations for three months ended August 31, 2004 | 
|                                                                                       |  |                      |         |   |                      
|Net sales                                                                              |  | $                    |        |   |                       | $ | 499,854 |                            |  | $ |                   |   |  | $            |        |   |  | $ | 499,854 |  
|Costs and expenses (income)                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |        |   |                       |   | 405,968 |                            |  |   |                   |   |  |              |        |   |  |   | 405,968 |  
|Selling, general and administrative                                                    |  |                      | 319     |   |                       |   | 26,245  |                            |  |   |                   |   |  |              |        |   |  |   | 26,564  |  
|Interest                                                                               |  |                      | 16,936  |   |                       |   | 1,007   |                            |  |   |                   |   |  |              | (882    | ) |  |   | 17,061  |  
|Loss on early retirement of debt                                                       |  |                      |        |   |                       |   |        |                            |  |   |                   |   |  |              |        |   |  |   |        |  
|Other income                                                                           |  |                      | (1,229  | ) |                       |   | (3,198  | )                          |  |   |                   |   |  |              | 882     |   |  |   | (3,545  | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 16,026  |   |                       |   | 430,022 |                            |  |   |                   |   |  |              |        |   |  |   | 446,048 |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (16,026 | ) |                       |   | 69,832  |                            |  |   |                   |   |  |              |        |   |  |   | 53,806  |  
|Income taxes (benefit)                                                                 |  |                      | (5,609  | ) |                       |   | 23,532  |                            |  |   |                   |   |  |              |        |   |  |   | 17,923  |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (10,417 | ) |                       |   | 46,300  |                            |  |   |                   |   |  |              |        |   |  |   | 35,883  |  
|Accounting change - net of income taxes                                                |  |                      |        |   |                       |   |        |                            |  |   |                   |   |  |              |        |   |  |   |        |  
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 46,300  |   |                       |   |        |                            |  |   |                   |   |  |              | (46,300 | ) |  |   |        |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | 35,883  |   |                       | $ | 46,300  |                            |  | $ |                   |   |  | $            | (46,300 | ) |  | $ | 35,883  |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                      
|Condensed consolidating statement of operations for three months ended August 31, 2003 | 
|                                                                                       |  |                      |         |   |                      
|Net sales                                                                              |  | $                    |        |   |                       | $ | 376,038 |                            |  | $ |                   |   |  | $            |        |   |  | $ | 376,038 |  
|Costs and expenses (income)                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |        |   |                       |   | 352,655 |                            |  |   |                   |   |  |              |        |   |  |   | 352,655 |  
|Selling, general and administrative                                                    |  |                      | 132     |   |                       |   | 25,435  |                            |  |   | 36                 |   |  |              |        |   |  |   | 25,603  |  
|Interest                                                                               |  |                      | 19,063  |   |                       |   | 1,809   |                            |  |   | 31                 |   |  |              | (1,112  | ) |  |   | 19,791  |  
|Loss on early retirement of debt                                                       |  |                      | 11,246  |   |                       |   |        |                            |  |   |                   |   |  |              |        |   |  |   | 11,246  |  
|Other income                                                                           |  |                      | (1,133  | ) |                       |   | (6,300  | )                          |  |   | (67                | ) |  |              | 1,304   |   |  |   | (6,196  | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 29,308  |   |                       |   | 373,599 |                            |  |   |                   |   |  |              | 192     |   |  |   | 403,099 |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (29,308 | ) |                       |   | 2,439   |                            |  |   |                   |   |  |              | (192    | ) |  |   | (27,061 | )
|Income taxes (benefit)                                                                 |  |                      | (10,258 | ) |                       |   | (2,102  | )                          |  |   |                   |   |  |              | (67     | ) |  |   | (12,427 | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (19,050 | ) |                       |   | 4,541   |                            |  |   |                   |   |  |              | (125    | ) |  |   | (14,634 | )
|Accounting change - net of income taxes                                                |  |                      |        |   |                       |   | (1,071  | )                          |  |   |                   |   |  |              |        |   |  |   | (1,071  | )
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 3,345   |   |                       |   |        |                            |  |   |                   |   |  |              | (3,345  | ) |  |   |        |  
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | (15,705 | ) |                       | $ | 3,470   |                            |  | $ |                   |   |  | $            | (3,470  | ) |  | $ | (15,705 | )
|                                                                                       |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |         |   |  |   |         |  



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##### Table of Contents

|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | -------------------- | -------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------------ | - | ------------ | - | - |  | - | -------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |          |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  |   | EliminatingEntries |   | Consolidated |  
|                                                                                      
|Condensed consolidating statement of cash flows for three months ended August 31, 2004 | 
|                                                                                       |  |                      |          |   |                      
|Net cash provided (used) by operations                                                 |  | $                    | (17,140  | ) |                       | $ | 60,994  |                            |  | $ |                   |   |              | $ |  |  | $ | 43,854   |  
|                                                                                       |  |                      |          |   |                      
|Investing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Capital expenditures                                                                   |  |                      |         |   |                       |   | (9,245  | )                          |  |   |                   |   |              |   |  |  |   | (9,245   | )
|Proceeds from disposal of assets                                                       |  |                      |         |   |                       |   | 2,137   |                            |  |   |                   |   |              |   |  |  |   | 2,137    |  
|Investments in life insurance contracts                                                |  |                      |         |   |                       |   | (53,829 | )                          |  |   |                   |   |              |   |  |  |   | (53,829  | )
|Other - net                                                                            |  |                      |         |   |                       |   | (1,934  | )                          |  |   |                   |   |              |   |  |  |   | (1,934   | )
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash used by investing                                                             |  |                      |         |   |                       |   | (62,871 | )                          |  |   |                   |   |              |   |  |  |   | (62,871  | )
|                                                                                       |  |                      |          |   |                      
|Financing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Long-term borrowings                                                                   |  |                      |         |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   |         |  
|Debt retirements                                                                       |  |                      |         |   |                       |   | (5      | )                          |  |   |                   |   |              |   |  |  |   | (5       | )
|Debt issuance costs                                                                    |  |                      |         |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   |         |  
|Debt retirement costs                                                                  |  |                      |         |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   |         |  
|Common dividends paid                                                                  |  |                      | (1,600   | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (1,600   | )
|Other - net                                                                            |  |                      | 2,832    |   |                       |   | (61     | )                          |  |   |                   |   |              |   |  |  |   | 2,771    |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash provided (used) by financing                                                  |  |                      | 1,232    |   |                       |   | (66     | )                          |  |   |                   |   |              |   |  |  |   | 1,166    |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents                                       |  |                      | (15,908  | ) |                       |   | (1,943  | )                          |  |   |                   |   |              |   |  |  |   | (17,851  | )
|                                                                                       |  |                      |          |   |                      
|Cash and cash equivalents at beginning of period                                       |  |                      | 134,813  |   |                       |   | 6,815   |                            |  |   |                   |   |              |   |  |  |   | 141,628  |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                                             |  | $                    | 118,905  |   |                       | $ | 4,872   |                            |  | $ |                   |   |              | $ |  |  | $ | 123,777  |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|                                                                                      
|Condensed consolidating statement of cash flows for three months ended August 31, 2003 | 
|                                                                                       |  |                      |          |   |                      
|Net cash provided (used) by operations                                                 |  | $                    | (88,174  | ) |                       | $ | 4,676   |                            |  | $ | (5                 | ) |              | $ |  |  | $ | (83,503  | )
|                                                                                       |  |                      |          |   |                      
|Investing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Capital expenditures                                                                   |  |                      |         |   |                       |   | (7,497  | )                          |  |   |                   |   |              |   |  |  |   | (7,497   | )
|Proceeds from disposal of assets                                                       |  |                      |         |   |                       |   | 1,806   |                            |  |   |                   |   |              |   |  |  |   | 1,806    |  
|Investments in life insurance contracts                                                |  |                      |         |   |                       |   | (519    | )                          |  |   |                   |   |              |   |  |  |   | (519     | )
|Other - net                                                                            |  |                      |         |   |                       |   | (1,224  | )                          |  |   |                   |   |              |   |  |  |   | (1,224   | )
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash used by investing                                                             |  |                      |         |   |                       |   | (7,434  | )                          |  |   |                   |   |              |   |  |  |   | (7,434   | )
|                                                                                       |  |                      |          |   |                      
|Financing activities                                                                   |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Long-term borrowings                                                                   |  |                      | 717,731  |   |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | 717,731  |  
|Debt retirements                                                                       |  |                      | (591,231 | ) |                       |   | (5      | )                          |  |   |                   |   |              |   |  |  |   | (591,236 | )
|Debt issuance costs                                                                    |  |                      | (15,834  | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (15,834  | )
|Debt retirement costs                                                                  |  |                      | (8,505   | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (8,505   | )
|Common dividends paid                                                                  |  |                      | (1,581   | ) |                       |   |        |                            |  |   |                   |   |              |   |  |  |   | (1,581   | )
|Other - net                                                                            |  |                      | (7       | ) |                       |   | (483    | )                          |  |   |                   |   |              |   |  |  |   | (490     | )
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Net cash provided (used) by financing                                                  |  |                      | 100,573  |   |                       |   | (488    | )                          |  |   |                   |   |              |   |  |  |   | 100,085  |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents                                       |  |                      | 12,399   |   |                       |   | (3,246  | )                          |  |   | (5                 | ) |              |   |  |  |   | 9,148    |  
|                                                                                       |  |                      |          |   |                      
|Cash and cash equivalents at beginning of period                                       |  |                      | 4,161    |   |                       |   | 2,038   |                            |  |   | 5                  |   |              |   |  |  |   | 6,204    |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                                             |  | $                    | 16,560   |   |                       | $ | (1,208  | )                          |  | $ |                   |   |              | $ |  |  | $ | 15,352   |  
|                                                                                       |  |                      |          |   |                       |   |         |                            |  |   |                    |   |              |   |   |  |   |          |  



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##### Table of Contents

EXHIBIT A



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors

Texas Industries, Inc.



We have reviewed the accompanying condensed
consolidated balance sheet of Texas Industries, Inc. and subsidiaries (the Company) as of August 31, 2004, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended August 31, 2004 and 2003.
These financial statements are the responsibility of the Companys management.



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



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



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



/s/ Ernst & Young LLP




September 23, 2004



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##### Table of Contents

MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Comparison of operations and financial condition for the three-month period
ended August 31, 2004 to the three-month period ended August 31, 2003.



BUSINESS SEGMENTS



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



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



|                            |  |                               |         |      |   |        
|--------------------------- |  | ----------------------------- | ------- | ---- | - | -------
|                            |  | Three months ended August 31,
|In thousands                |  | 2004                          |         | 2003
|                            |  |                              
|TOTAL SALES                 |  |                               |         |      |   |        
|Cement                      |  | $                             | 104,357 |      | $ | 90,885 
|Ready-mix                   |  |                               | 54,519  |      |   | 52,425 
|Stone, sand & gravel        |  |                               | 32,524  |      |   | 32,205 
|Structural mills            |  |                               | 207,119 |      |   | 128,479
|Bar mill                    |  |                               | 62,621  |      |   | 33,146 
|                            |  |                              
|UNITS SHIPPED               |  |                               |         |      |   |        
|Cement (tons)               |  |                               | 1,449   |      |   | 1,323  
|Ready-mix (cubic yards)     |  |                               | 939     |      |   | 905    
|Stone, sand & gravel (tons) |  |                               | 5,830   |      |   | 5,883  
|Structural mills (tons)     |  |                               | 387     |      |   | 394    
|Bar mill (tons)             |  |                               | 106     |      |   | 99     
|                            |  |                              
|NET SALES                   |  |                               |         |      |   |        
|Cement                      |  | $                             | 88,935  |      | $ | 75,905 
|Ready-mix                   |  |                               | 54,464  |      |   | 52,356 
|Stone, sand & gravel        |  |                               | 24,082  |      |   | 24,082 
|Other products              |  |                               | 24,465  |      |   | 28,724 
|Delivery fees               |  |                               | 17,127  |      |   | 15,305 
|                            |  |                               |         |      |   |        
|TOTAL CAC                   |  |                               | 209,073 |      |   | 196,372
|                            |  |                              
|Structural mills            |  |                               | 207,119 |      |   | 128,479
|Bar mill                    |  |                               | 62,621  |      |   | 33,146 
|Other products              |  |                               | 7,013   |      |   | 4,683  
|Delivery fees               |  |                               | 14,028  |      |   | 13,358 
|                            |  |                               |         |      |   |        
|TOTAL STEEL                 |  |                               | 290,781 |      |   | 179,666
|                            |  |                               |         |      |   |        
|TOTAL NET SALES             |  | $                             | 499,854 |      | $ | 376,038
|                            |  |                               |         |      |   |        



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|                                                        |  |                               |         |   |      |   |         |  
|------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                        |  | Three months ended August 31, |        
|In thousands                                            |  | 2004                          |         |   | 2003 |  
|                                                        |  |                              
|CAC OPERATIONS                                          |  |                               |         |   |      |   |         |  
|Gross profit                                            |  | $                             | 42,319  |   |      | $ | 41,200  |  
|Less: Depreciation, depletion & amortization            |  |                               | 11,047  |   |      |   | 11,473  |  
|Selling, general & administrative                       |  |                               | 12,589  |   |      |   | 11,297  |  
|Other income                                            |  |                               | (2,623  | ) |      |   | (1,771  | )
|                                                        |  |                               |         |   |      |   |         |  
|OPERATING PROFIT                                        |  |                               | 21,306  |   |      |   | 20,201  |  
|                                                        |  |                              
|STEEL OPERATIONS                                        |  |                               |         |   |      |   |         |  
|Gross profit                                            |  |                               | 74,608  |   |      |   | 5,609   |  
|Less: Depreciation & amortization                       |  |                               | 12,177  |   |      |   | 12,178  |  
|Selling, general & administrative                       |  |                               | 7,007   |   |      |   | 7,466   |  
|Other income                                            |  |                               | (504    | ) |      |   | (3,941  | )
|                                                        |  |                               |         |   |      |   |         |  
|OPERATING PROFIT (LOSS)                                 |  |                               | 55,928  |   |      |   | (10,094 | )
|                                                        |  |                               |         |   |      |   |         |  
|TOTAL OPERATING PROFIT                                  |  |                               | 77,234  |   |      |   | 10,107  |  
|                                                        |  |                              
|CORPORATE RESOURCES                                     |  |                               |         |   |      |   |         |  
|Other income                                            |  |                               | 418     |   |      |   | 484     |  
|Less: Depreciation & amortization                       |  |                               | 451     |   |      |   | 476     |  
|Selling, general & administrative                       |  |                               | 6,334   |   |      |   | 6,139   |  
|                                                        |  |                               |         |   |      |   |         |  
|                                                        |  |                               | (6,367  | ) |      |   | (6,131  | )
|                                                        |  |                              
|INTEREST EXPENSE                                        |  |                               | (17,061 | ) |      |   | (19,791 | )
|                                                        |  |                              
|LOSS ON EARLY RETIREMENT OF DEBT                        |  |                               |        |   |      |   | (11,246 | )
|                                                        |  |                               |         |   |      |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGE |  | $                             | 53,806  |   |      | $ | (27,061 | )
|                                                        |  |                               |         |   |      |   |         |  



RESULTS OF OPERATIONS



CAC Operations



CAC operating profit increased $1.1 million from the prior year period.
Overall demand in the Companys Texas and California markets continues to remain solid.



Net Sales. CAC sales at $209.1 million increased 6% from the prior year period. Total cement sales increased $13.5 million on 5% higher average trade prices and 10% higher shipments. Total ready-mix sales
increased $2.1 million on 4% higher volume and comparable average trade prices. Total aggregate sales increased $300,000 as 4% higher average trade prices offset somewhat lower shipments. Record levels of rainfall for summer 2004 restricted
shipments in certain Texas markets.



Operating Costs.
CAC cost of products sold at $177.6 million, including depreciation, depletion and amortization, increased $11.2 million from the prior year period on higher cement shipments and ready-mix distribution costs.



Selling, general and administrative expense at $12.8 million, including
depreciation and amortization, increased $1.3 million from the prior year period primarily due to higher incentive compensation and general expenses.



Other income at $2.6 million increased $800,000 due to higher gains from the disposal of surplus operating assets.



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##### Table of Contents

Steel Operations



Steel operating profit increased $66.0 million from the prior year period. Margins that began to recover in January 2004 have generally stabilized as
higher selling prices have more than offset higher raw material costs despite continued low levels of nonresidential construction.



Net Sales. Steel sales at $290.8 million increased $111.1 million from the prior year period. Structural steel sales increased $78.6 million on 64%
higher average realized prices and comparable shipments. Bar mill sales increased $29.5 million on 76% higher average realized prices and 7% higher shipments.



Operating Costs. Steel cost of products sold at $228.4 million, including depreciation and amortization, increased $42.1 million from the prior
year period due to the effect of higher raw material costs on unit costs. During last year the Company experienced unprecedented increases in the cost of steel scrap and certain additives and alloys, the principal raw materials used in its steel
production. Scrap cost increases have begun to moderate during the August 2004 quarter.



Selling, general and administration expense at $7.0 million decreased $500,000 from the prior year period as lower bad debt expense was partially offset by higher incentive compensation expense.



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



Corporate Resources



Selling, general and
administrative expense at $6.8 million, including depreciation and amortization, increased $200,000 from the prior year as higher incentive compensation expense was partially offset by lower general expenses.



Other income at $400,000 was comparable to the prior year period as higher
interest income offset lower gains from disposal of corporate assets.



Interest Expense



Interest expense at $17.1
million decreased $2.7 million from the prior year period. The lower interest was primarily the result of the Companys interest rate swaps on $300 million of the senior notes and the repayment of life insurance contract distributions.



Loss on Early Retirement of Debt



As a result of the June 2003 refinancing, the Company recognized an ordinary
loss on early retirement of debt of $11.2 million in the prior year period.



Income Taxes



The Companys effective tax
rate is estimated at 33.3% compared to 45.3% in the prior year period. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense.



Cumulative Effect of Accounting Change  Net of Income Taxes



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



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LIQUIDITY AND CAPITAL RESOURCES



In addition to cash on hand of $123.8 million at August 31, 2004, the Companys sources of liquidity include cash from operations, borrowings
available under its $100 million senior secured credit facility and distributions available under its investments in life insurance contracts.



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



No borrowings were outstanding under the facility at August
31, 2004; however, $26.7 million of the facility was utilized to support letters of credit. Borrowings under the facility are limited based on the net amount of eligible accounts receivable. In addition, there is the requirement to meet certain
financial tests and to maintain certain financial ratios if the excess availability under the facility falls below $30 million, including maintaining a fixed charge coverage ratio and meeting minimum tangible net worth test.



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



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



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



The
Company historically has financed major capital expansion projects with cash from operations and long-term borrowings. Working capital requirements and capital expenditures for normal replacement and technological upgrades of existing equipment and
expansions of its operations are funded with cash from operations. The fiscal year 2005 capital expenditure budget for these activities is estimated currently at approximately $75 million. In addition, the Company leases certain mobile and other
equipment used in its operations under operating leases that may in the normal course of business be renewed or replaced by subsequent leases.



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



Cash Flows



Net cash provided by operations was $43.9 million, compared to $83.5 million used in the prior year period. Operating cash
flows excluding repurchases of trade receivables increased $11.8 million primarily as a result of increased net income and the related effect on deferred taxes partially offset by changes in working capital items. Steel inventories increased $27.7
million in anticipation of a scheduled shutdown to refurbish the Steel production facilities. In the prior year period, the Company funded the repurchase of $115.5 million of trade receivables out of the proceeds of the June 2003 refinancing.



Net cash used by investing activities was $62.9 million,
compared to $7.4 million in the prior year period. Capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of the Companys operations excluding major plant expansions were $9.2 million, up
$1.7 million from the prior year period. The Company increased its investments in life insurance contracts $53.3 million over the prior year period, primarily as a result of repaying $51.2 million in prior distributions.



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Net cash provided by financing activities was $1.2 million, compared to $100.1 million in the prior year
period. The proceeds from the June 2003 refinancing net of issuance and retirement costs funded the repurchase of trade receivables. The Companys quarterly cash dividend of $.075 per common share remained unchanged from the prior year period.



OTHER ITEMS



Environmental Matters



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



Market Risk



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



The Company has $600 million of 10.25% fixed-rate senior notes outstanding. The fair value of the debt will vary as interest rates change.



The Company has entered into interest rate swap agreements on $300 million of
the underlying fixed rate debt. The swaps change the characteristics of the interest payments from fixed rate payments to short-term LIBOR-based variable rate payments in order to achieve a mix of interest rates on the Companys long-term debt
which, over time, is expected to moderate financing costs. The swaps are sensitive to interest rate changes. For example, if short-term interest rates increase (decrease) by one percentage point, annual pretax interest expense would increase
(decrease) by $3 million.



Critical Accounting Policies



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



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

Private Securities Litigation Reform Act of 1995



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



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##### Table of Contents

Item 4. Controls and Procedures



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



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



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



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



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



The Company is restricted by its loan covenants from purchasing its Common Stock on the open market. However, the Company repurchases shares of Common
Stock in connection with so-called stock swap exercises of employee stock options in which shares are surrendered or deemed surrendered to the Company to pay the exercise price or to satisfy tax withholding obligations. The following
table presents information with respect to such repurchases which occurred during the three-month period ended August 31, 2004.



|                                 |  |                                     |  |                                  |  |                                                                                    |  |                                                                                
|-------------------------------- |  | ----------------------------------- |  | -------------------------------- |  | ---------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------
|Period                           |  | (a) TotalNumber of Shares Purchased |  | (b) Average Price Paid per Share |  | (c) Total Number of Shares Purchasedas Part of PubliclyAnnounced Plans or Programs |  | (d) Maximum Numberof Shares that MayYet Be PurchasedUnder the Plans or Programs
|June 1, 2004 - June 30, 2004     |  | 49,802                              |  | 37.22                            |  | N/A                                                                                |  | N/A                                                                            
|July 1, 2004 - July 31, 2004     |  |                                    |  |                                 |  | N/A                                                                                |  | N/A                                                                            
|August 1, 2004 - August 31, 2004 |  |                                    |  |                                 |  | N/A                                                                                |  | N/A                                                                            
|                                 |  |                                     |  |                                  |  |                                                                                    |  |                                                                                
|Total                            |  | 49,802                              |  | 37.22                            |  | N/A                                                                                |  | N/A                                                                            
|                                 |  |                                     |  |                                  |  |                                                                                    |  |                                                                                



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##### Table of Contents

Item 6. Exhibits



The following
exhibits are included herein:



(10.1)
Employment Agreement, dated as of June 1, 2004 as between the Company and Mel G. Brekhus



(12.1) Computation of Ratios of Earnings to Fixed Charges



(15.1) Letter re: Unaudited Interim Financial Information



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



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



(32.1) Section 1350 Certification of Chief Executive Officer



(32.2) Section 1350 Certification of Chief Financial Officer



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



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                |  |                                                               
|--------------- |  | --------------------------------------------------------------
|                |  | TEXAS INDUSTRIES, INC.                                        
|                | 
|October 8, 2004 |  | /s/ Richard M. Fowler                                         
|                |  | Richard M. Fowler                                             
|                |  | Executive Vice President - Finance and Chief Financial Officer
|                |  | (Principal Financial Officer)                                 
|                | 
|October 8, 2004 |  | /s/ James R. McCraw                                           
|                |  | James R. McCraw                                               
|                |  | Vice President  Accounting and Information Services          
|                |  | (Principal Accounting Officer)                                



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INDEX TO EXHIBITS



|         |  |                                                                                          |  |     
|-------- |  | ---------------------------------------------------------------------------------------- |  | ----
|Exhibits |  |                                                                                          |  | Page
|10.1     |  | Employment Agreement, dated as of June 1, 2004 as between the Company and Mel G. Brekhus |  | **  
|         |  |                                                                                         
|12.1     |  | Computation of Ratios of Earnings to Fixed Charges                                       |  | 29  
|         |  |                                                                                         
|15.1     |  | Letter re: Unaudited Interim Financial Information                                       |  | 30  
|         |  |                                                                                         
|31.1     |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                        |  | 31  
|         |  |                                                                                         
|31.2     |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                        |  | 32  
|         |  |                                                                                         
|32.1     |  | Section 1350 Certification of Chief Executive Officer                                    |  | 33  
|         |  |                                                                                         
|32.2     |  | Section 1350 Certification of Chief Financial Officer                                    |  | 34  

---

|** | Electronically filed only.
|-- | --------------------------



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