Texas Industries 10-Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission File Number 1-4887

TEXAS INDUSTRIES, INC.

(Exact name of Registrant as specified in its Charter)

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

1341 West Mockingbird Lane, Suite 700W, Dallas, Texas	75247-6913
(Address of principal executive offices)	(Zip Code)

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

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	ý	Accelerated Filer	¨
Non-accelerated Filer	o	Smaller Reporting Company	¨

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

There were 28,428,802 shares of the Registrant’s Common Stock, $1.00 par value, outstanding as of March 26, 2013.

INDEX

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Loss	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Report of Independent Registered Public Accounting Firm	28
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	41
Item 6.	Exhibits	41
SIGNATURES		43

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	(Unaudited)
In thousands	February 28, 2013			May 31, 2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	31,664		$	88,027
Receivables – net	98,458			98,836
Inventories	100,282			99,441
Deferred income taxes and prepaid expenses	20,282			19,007
Discontinued operations held for sale	38,769			40,344
TOTAL CURRENT ASSETS	289,455			345,655
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements	170,078			168,173
Buildings	49,637			49,567
Machinery and equipment	1,156,061			1,142,439
Construction in progress	483,641			436,552
	1,859,417			1,796,731
Less depreciation and depletion	647,281			611,406
	1,212,136			1,185,325
OTHER ASSETS
Goodwill	1,715			1,715
Real estate and investments	23,024			20,865
Deferred income taxes and other charges	22,141			23,368
	46,880			45,948
	$	1,548,471		$	1,576,928
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	57,000		$	64,825
Accrued interest, compensation and other	48,134			61,317
Current portion of long-term debt	1,816			1,214
TOTAL CURRENT LIABILITIES	106,950			127,356
LONG-TERM DEBT	658,392			656,949
OTHER CREDITS	88,088			96,352
SHAREHOLDERS’ EQUITY
Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 28,324 and 27,996shares, respectively	28,324			27,996
Additional paid-in capital	506,112			488,637
Retained earnings	184,542			204,136
Accumulated other comprehensive loss	(23,937		)	(24,498		)
	695,041			696,271
	$	1,548,471		$	1,576,928

See notes to consolidated financial statements.

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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands except per share	2013			2012			2013			2012
NET SALES	$	141,359		$	121,894		$	483,575		$	435,696
Cost of products sold	129,035			123,774			444,297			425,464
GROSS PROFIT	12,324			(1,880		)	39,278			10,232
Selling, general and administrative	17,056			17,265			51,679			46,774
Restructuring charges	—			—			—			3,153
Interest	7,227			8,512			22,462			26,810
Other income	(2,091		)	(1,332		)	(6,614		)	(8,725		)
	22,192			24,445			67,527			68,012
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS	(9,868		)	(26,325		)	(28,249		)	(57,780		)
Income taxes (benefit)	(1,355		)	(1,148		)	(2,151		)	(2,601		)
NET LOSS FROM CONTINUING OPERATIONS	$	(8,513	)	$	(25,177	)	$	(26,098	)	$	(55,179	)
NET INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX	2,699			897			6,504			2,442
NET LOSS	$	(5,814	)	$	(24,280	)	$	(19,594	)	$	(52,737	)
NET LOSS PER SHARE FROM CONTINUING OPERATIONS:
Basic	$	(0.30	)	$	(0.90	)	$	(0.93	)	$	(1.98	)
Diluted	$	(0.30	)	$	(0.90	)	$	(0.93	)	$	(1.98	)
NET INCOME FROM DISCONTINUED OPERATIONS:
Basic	$	0.09		$	0.03		$	0.23		$	0.09
Diluted	$	0.09		$	0.03		$	0.23		$	0.09
NET LOSS PER SHARE:
Basic	$	(0.21	)	$	(0.87	)	$	(0.70	)	$	(1.89	)
Diluted	$	(0.21	)	$	(0.87	)	$	(0.70	)	$	(1.89	)
AVERAGE SHARES OUTSTANDING
Basic	28,190			27,926			28,073			27,894
Diluted	28,190			27,926			28,073			27,894
CASH DIVIDENDS DECLARED PER SHARE	$	—		$	—		$	—		$	0.075

See notes to consolidated financial statements.

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(Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands	2013			2012			2013			2012
Net loss	$	(5,814	)	$	(24,280	)	$	(19,594	)	$	(52,737	)
Other comprehensive income
Net actuarial gains (losses) of defined postretirement benefit plans
Reclassification of recognized transactions, net of taxes - $126, $209, $736 and $627, respectively	219			363			784			1,088
Adjustment, net of tax	—			—			(55		)	—
Prior service cost of defined postretirement benefit plans
Reclassification of recognized transactions, net of taxes - ($71), ($71), ($413) and ($213), respectively	(123		)	(123		)	(168		)	(369		)
Total other comprehensive income	96			240			561			719
Comprehensive loss	$	(5,718	)	$	(24,040	)	$	(19,033	)	$	(52,018	)

See notes to consolidated financial statements.

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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Nine months ended
	February 28,			February 29,
In thousands	2013			2012
OPERATING ACTIVITIES
Net loss	$	(19,594	)	$	(52,737	)
Adjustments to reconcile net loss to cash provided by operating activities
Depreciation, depletion and amortization	42,968			46,495
(Gains)/Loss on asset disposals	(4,822		)	(3,736		)
Deferred income tax (benefit) expense	1,025			(1,653		)
Stock-based compensation expense	7,015			1,710
Other – net	(7,555		)	(4,424		)
Changes in operating assets and liabilities
Receivables – net	830			7,624
Inventories	(710		)	10,048
Prepaid expenses	(2,158		)	3,261
Accounts payable and accrued liabilities	(7,228		)	(4,466		)
Net cash provided by operating activities	9,771			2,122
INVESTING ACTIVITIES
Capital expenditures – expansions	(61,344		)	(64,901		)
Capital expenditures – other	(17,752		)	(31,394		)
Proceeds from asset disposals	5,783			4,188
Investments in life insurance contracts	2,366			3,354
Other – net	(67		)	(302		)
Net cash used by investing activities	(71,014		)	(89,055		)
FINANCING ACTIVITIES
Debt payments	(2,236		)	(173		)
Debt issuance costs	—			(1,829		)
Stock option exercises	7,116			1,749
Common dividends paid	—			(2,091		)
Net cash provided (used) by financing activities	4,880			(2,344		)
Decrease in cash and cash equivalents	(56,363		)	(89,277		)
Cash and cash equivalents at beginning of period	88,027			116,432
Cash and cash equivalents at end of period	$	31,664		$	27,155

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Texas Industries, Inc. and subsidiaries is a leading supplier of heavy construction materials in the southwestern United States through our three business segments: cement, aggregates and consumer products. Our principal products are gray portland cement, produced and sold through our cement segment; stone, sand and gravel, produced and sold through our aggregates segment; and ready-mix concrete, produced and sold through our consumer products segment. Our facilities are concentrated primarily in Texas, Louisiana and California. When used in these notes the terms “Company,” “we,” “us” or “our” mean Texas Industries, Inc. and subsidiaries unless the context indicates otherwise.

1. 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 notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended February 28, 2013 are not necessarily indicative of the results that may be expected for the year ended May 31, 2013. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Texas Industries, Inc. for the year ended May 31, 2012.

Principles of Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and all subsidiaries except for a joint venture in which the Company has a 40% equity interest. The joint venture is accounted for using the equity method. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Discontinued Operations Held for Sale. The prior period consolidated financial statements in this Form 10-Q have been reclassified to reflect the businesses held for sale and discontinued operations as discussed in Note 2 - Discontinued Operations and Held for Sale Businesses.

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.

Fair Value of Financial Instruments. The estimated fair value of each class of financial instrument as of February 28, 2013 and May 31, 2012 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices, which are level two inputs. As of February 28, 2013, the fair value of our long-term debt, including the current portion, was approximately $718.7 million compared to the carrying amount of $660.2 million. As of May 31, 2012, the fair value of our long-term debt, including the current portion, was approximately $646.8 million compared to the carrying amount of $658.2 million.

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.

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 we are aware of a specific customer’s inability to make required payments, specific amounts are added to the reserve.

Environmental Liabilities. We are subject to environmental laws and regulations established by federal, state and local authorities, and make provision for the estimated costs related to compliance when it is probable that an estimable liability has been incurred.

Legal Contingencies. We are a defendant 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 an estimable liability has been incurred.

Inventories. Inventories are stated at the lower of cost or market. We use the last-in, first out (“LIFO”) method to value finished products, work in process and raw material inventories excluding natural aggregate inventories. Natural aggregate inventories and parts and supplies inventories are valued using the average cost method. Our natural aggregate inventory excludes volumes in excess of an average twelve-month period of actual sales.

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Long-lived Assets. Management reviews long-lived assets on a facility by facility basis 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 our products, capital needs, economic trends and other factors. Estimates of future cash flows reflect Management’s belief that it operates in a cyclical industry.

In the fourth quarter of our prior fiscal year, management evaluated the Hunter, Texas cement plant, including the capitalized construction and interest costs associated with the expansion. We expect the Texas market to recover to pre-recession levels and to complete the expansion project. Based on historical margins, we believe the undiscounted cash flows over the remaining life of the Hunter plant after completion of the expansion will significantly exceed the current investment in the plant as well as the remaining costs of the expansion and future capital expenditures necessary to achieve these cash flows.

Property, plant and equipment is recorded at cost. Costs incurred to construct certain long-lived assets include capitalized interest which is amortized over the estimated useful life of the related asset. Interest is capitalized during the construction period of qualified assets based on the average amount of accumulated expenditures and the weighted average interest rate applicable to borrowings outstanding during the period. If accumulated expenditures exceed applicable borrowings outstanding during the period, capitalized interest is allocated to projects under construction on a pro rata basis. Provisions for depreciation are computed generally using the straight-line method. Useful lives for our primary operating facilities range from 10 to 25 years with certain cement facility structures having useful lives of 40 years. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. The costs of removing overburden and waste materials to access mineral deposits are referred to as stripping costs. All production phase stripping costs are recognized as costs of the inventory produced during the period the stripping costs are incurred. Maintenance and repairs are charged to expense as incurred.

Goodwill and Goodwill Impairment. Management tests goodwill for impairment annually by reporting unit in the fourth quarter of our fiscal year using a two-step process. The first step of the impairment test identifies potential impairment by comparing the fair value of a reporting unit to its carrying value including goodwill. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying value of the reporting unit goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.

Goodwill resulting from the acquisition of ready-mix operations in Texas and Louisiana and identified with our consumer products operations has a carrying value of $1.7 million at both February 28, 2013 and May 31, 2012. Based on an impairment test performed as of March 31, 2012, the fair value of the reporting unit exceeds its carrying value, and therefore, no potential impairment was identified.

Income Taxes. Texas Industries, Inc. (the parent company) joins in filing a consolidated return with its subsidiaries based on federal and certain state tax filing requirements. Certain subsidiaries also file separate state income tax returns. 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. We recognize and classify deferred income taxes using an asset and liability method, whereby deferred tax assets and liabilities are recognized based on the tax effect of temporary differences between the financial statements and the tax basis of assets and liabilities, as measured by current enacted tax rates.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the year the tax returns are filed.

The amount of income tax we pay is subject to ongoing audits by federal and state authorities which may result in proposed assessments. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We account for these uncertain tax issues using a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step determines if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step measures the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings, refinement of estimates, or realization of earnings or deductions that differ from our estimates. To the extent that the

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final outcome of these matters differs from the amounts recorded, such differences generally will impact our provision for income taxes in the period in which such a determination is made. Our provisions for income taxes include the impact of reserve provisions and changes to reserves that are considered appropriate including related interest and penalties.

Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and recognizes a valuation allowance unless such deferred tax assets were deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets is dependent upon various factors including the generation of taxable income during future periods. In determining the need for a valuation allowance, we consider such factors as historical earnings, the reversal of existing temporary differences, prior taxable income (if carryback is permitted under the tax law), and prudent and feasible tax planning strategies. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination. If we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to earnings at such time. See further discussion in note 9.

Real Estate and Investments. Surplus real estate and real estate acquired for development of high quality industrial, office or multi-use parks totaled $7.3 million at February 28, 2013 and $7.6 million at May 31, 2012.

Investments include life insurance contracts purchased in connection with certain of our benefit plans. The contracts, recorded at their net cash surrender value, totaled $1.6 million (net of distributions of $99.4 million plus accrued interest and fees) at February 28, 2013 and $0.7 million (net of distributions of $94.4 million plus accrued interest and fees) at May 31, 2012. We can elect to receive distributions chargeable against the cash surrender value of the policies in the form of borrowings or withdrawals or we can elect to surrender the policies and receive their net cash surrender value.

Investment in Joint Venture. In November 2011 we entered into a joint venture agreement with a ready-mix operator based in Waco, Texas. We contributed certain of our central Texas ready-mix plants and related assets to the joint venture in return for a 40% equity interest. The joint venture operates ready-mix plants serving the central Texas market. The day to day business operations are managed by the 60% partner in the venture. We supply cement to the joint venture. The debt of the joint venture is secured by the underlying assets of the joint venture. In addition, we have guaranteed 50% and our partner has guaranteed 100% of the debt of the joint venture. Our investment totaled $14.1 million at February 28, 2013 and $12.5 million at May 31, 2012. Our equity in income of the joint venture was $1.6 million for the nine-month period ended February 28, 2013.

Deferred Other Charges. Deferred other charges totaled $19.5 million at February 28, 2013 and $20.4 million at May 31, 2012 and are composed primarily of debt issuance costs that totaled $11.6 million at February 28, 2013 and $13.0 million at May 31, 2012. The costs are amortized over the term of the related debt.

Other Credits. Other credits totaled $88.1 million at February 28, 2013 and $96.4 million at May 31, 2012 and are composed primarily of liabilities related to our retirement plans, deferred compensation agreements and asset retirement obligations.

Asset Retirement Obligations. We record a liability for legal obligations associated with the retirement of our long-lived assets in the period in which it is incurred if an estimate of fair value of the obligation can be made. The discounted fair value of the obligations incurred in each period are added to the carrying amount of the associated assets and depreciated over the lives of the assets. The liability is accreted at the end of each period through a charge to operating expense. A gain or loss on settlement is recognized if the obligation is settled for other than the carrying amount of the liability.

We incur legal obligations for asset retirement as part of our normal operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Determining the amount of an asset retirement liability requires estimating the future cost of contracting with third parties to perform the obligation. The estimate is significantly impacted by, among other considerations, management’s assumptions regarding the scope of the work required, labor costs, inflation rates, market-risk premiums and closure dates.

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Changes in asset retirement obligations are as follows:

	Nine months ended
	February 28,		February 29,
In thousands	2013		2012
Balance at beginning of period	$3,879		$4,455
Additions	219		287
Accretion expense	130		132
Settlements	(1,617	)	(1,026	)
Balance at end of period	$2,611		$3,848

Accumulated Other Comprehensive Loss. Amounts recognized in accumulated other comprehensive loss represent adjustments related to a defined benefit retirement plan and a postretirement health benefit plan covering approximately 600 employees and retirees of our California cement subsidiary. The amounts totaled $23.9 million (net of tax of $5.7 million) at February 28, 2013 and $24.5 million (net of tax of $6.0 million) at May 31, 2012.

Net Sales. Sales are recognized when title has transferred and products are delivered. We include delivery fees in the amount we bill customers to the extent needed to recover our cost of freight and delivery. Net sales are presented as revenues and include these delivery fees.

Other Income. Routine sales of surplus operating assets and real estate resulted in gains of $1.9 million and $1.0 million in the three-month periods ended February 28, 2013 and February 29, 2012, respectively and $4.8 million and $1.7 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively. In addition, we sold emissions credits associated with our Crestmore cement plant in Riverside, California resulting in a gain of $2.5 million in the nine-month period ended February 29, 2012.

In July 2011 we entered into an asset exchange transaction with CEMEX USA in which we acquired three ready-mix concrete plants and a sand and gravel plant that serve the Austin, Texas metropolitan market. In exchange, we transferred to CEMEX USA seven ready-mix concrete plants in the Houston, Texas market, and we designated four non-operating ready-mix plant sites in the Houston area as surplus real estate. The exchange resulted in the acquisition of ready-mix and aggregate property, plant and equipment of $6.1 million and the recognition of a gain of $2.1 million in the nine-month period ended February 29, 2012. The gain from the transaction and the operating results of the acquired ready-mix operations are reported in our consumer products segment, and the operating results of the acquired sand and gravel operations are reported in our aggregates segment.

Stock-based Compensation. We have provided stock-based compensation to employees and non-employee directors in the form of non-qualified and incentive stock options, restricted stock, stock appreciation rights, deferred compensation agreements and stock awards. In addition the Company began issuing time-lapse restricted stock units for the first time to employees in the three-month period ended February 28, 2013. We use the Black-Scholes option-pricing model to determine the fair value of stock options granted as of the date of grant. Options with graded vesting are valued as single awards and the related compensation cost is recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. We use the closing stock price on the date grant to determine the fair value of restricted stock units. The restricted stock units have cliff vesting at the end of a four year term, and we valued them as a single award with the related compensation cost recognized using a straight-line method over the vesting period adjusted for estimated forfeitures. We use the average stock price on the date of grant to determine the fair value of restricted stock awards paid. A liability, which is included in other credits, is recorded for stock appreciation rights, deferred compensation agreements and stock awards expected to be settled in cash, based on their fair value at the end of each period until such awards are paid. See further discussion in note 7.

Earnings Per Share (“EPS”). Income or loss allocated to common shareholders adjusts net income or loss for the participation in earnings of unvested restricted shares outstanding.

Basic weighted-average number of common shares outstanding during the period includes contingently issuable shares and excludes outstanding unvested restricted shares. Contingently issuable shares outstanding at February 28, 2013 relate to deferred compensation agreements in which directors elected to defer their fees. The deferred compensation is denominated in shares of our common stock and issued in accordance with the terms of the agreement subsequent to retirement or separation from us. The shares are considered contingently issuable because the director has an unconditional right to the shares to be issued.

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Diluted weighted-average number of common shares outstanding during the period adjusts basic weighted-average shares for the dilutive effect of stock options, restricted shares and awards.

Basic and Diluted EPS are calculated as follows:

	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands except per share	2013			2012			2013			2012
Earnings
Net loss from continuing operations	$	(8,513	)	$	(25,177	)	$	(26,098	)	$	(55,179	)
Net income (loss) from discontinued operations	$	2,699		$	897		$	6,504		$	2,442
Unvested restricted share participation	5			12			16			26
Loss allocated to common shareholders	$	(5,809	)	$	(24,268	)	$	(19,578	)	$	(52,711	)
Shares
Weighted-average shares outstanding	28,200			27,936			28,086			27,906
Contingently issuable shares	4			3			3			2
Unvested restricted shares	(14		)	(13		)	(16		)	(14		)
Basic weighted-average shares	28,190			27,926			28,073			27,894
Stock option, restricted share and award dilution	—			—			—			—
Diluted weighted-average shares (1)	28,190			27,926			28,073			27,894
Net loss from continuing operations
Basic	$	(0.30	)	$	(0.90	)	$	(0.93	)	$	(1.98	)
Diluted	$	(0.30	)	$	(0.90	)	$	(0.93	)	$	(1.98	)
Net income (loss) from discontinued operations
Basic	0.09			0.03			0.23			0.09
Diluted	0.09			0.03			0.23			0.09
Net loss per share
Basic	(0.21		)	(0.87		)	(0.70		)	(1.89		)
Diluted	(0.21		)	(0.87		)	(0.70		)	(1.89		)
(1)    Shares excluded due to antidilutive effect of stock options, restricted shares and awards	583			1,420			409			1,380

Recently Issued Accounting Guidance. In June 2011, the Financial Accounting Standards Board issued new accounting guidance that requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. In December 2011, the Financial Accounting Standards Board issued an amendment to an existing accounting standard which defers the requirement to present reclassification adjustments for each component of other comprehensive income on the face of the income statement. The new guidance is effective for us on June 1, 2012 and has not had a material impact on our consolidated financial statements.

2. Discontinued Operations and Held for Sale Businesses

On March 22, 2013, our subsidiaries exchanged their expanded shale and clay lightweight aggregates manufacturing business for the ready-mix concrete business of subsidiaries of Trinity Industries, Inc. in east Texas and southwest Arkansas. Pursuant to the agreements, we transferred our expanded shale and clay manufacturing facilities in Streetman, Texas; Boulder, Colorado and Frazier Park, California; and our DiamondPro® product line in exchange for 42 ready-mix concrete plants stretching from Texarkana to Beaumont in east Texas and in southwestern Arkansas, two aggregate distribution facilities in Beaumont and Port Arthur, Texas, and related assets. We anticipate recognizing a gain on the transaction, the amount of which is still being finalized and will be included in the results for our discontinued operations in our fourth quarter 2013.

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The following table summarizes the assets and liabilities of all discontinued operations held for sale as of February 28, 2013 and reclassified as assets held for sale on May 31, 2012.

	February 28,		May 31,
In thousands	2013		2012
Assets:
Inventory	$	29,645	$	30,072
Property Plant and Equipment	9,124		10,272
Total Assets in Discontinued Operations Held for Sale	$	38,769	$	40,344

The following table summarizes the revenue, earnings before and net of income tax expense on all discontinued operations held for sale for the three-months and nine-months ended February 28, 2013 and February 29, 2012:

	Three months ended				Nine months ended
	February 28,		February 29,		February 28,		February 29,
In thousands	2013		2012		2013		2012
Discontinued Operations
Revenue	$	13,844	$	12,741	$	42,758	$	36,751
Earnings on discontinued operations, before taxes	$	4,206	$	1,503	$	10,070	$	3,735
Earnings on discontinued operations, net of taxes	$	2,699	$	897	$	6,504	$	2,442

3. Working Capital

Working capital totaled $182.5 million at February 28, 2013 compared to $218.3 million at May 31, 2012. Selected components of working capital are summarized below.

Receivables consist of:

	February 28,		May 31,
In thousands	2013		2012
Trade notes and accounts receivable	$	97,593	$	97,621
Other	865		1,215
	$	98,458	$	98,836

Trade notes and accounts receivable are presented net of allowances for doubtful receivables of $2.9 million at February 28, 2013 and $2.5 million at May 31, 2012. Provisions for bad debts charged to expense were $0.9 million and $1.2 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively. Uncollectible accounts written off totaled $0.5 million and $0.3 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively.

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Inventories consist of:

	February 28,		May 31,
In thousands	2013		2012
Finished products	$	5,111	$	7,664
Work in process	11,923		12,505
Raw materials	16,638		9,449
Total inventories at LIFO cost	33,672		29,618
Finished products	21,475		23,451
Raw materials	143		229
Parts and supplies	44,992		46,143
Total inventories at average cost	66,610		69,823
Total inventories	$	100,282	$	99,441

All inventories are stated at the lower of cost or market. Finished products, work in process and raw material inventories, excluding natural aggregate inventories, are valued using the last-in, first-out (“LIFO”) method. Natural aggregate finished products and raw material inventories and parts and supplies inventories are valued using the average cost method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation. If the average cost method (which approximates current replacement cost) had been used for all of these inventories, inventory values would have been higher by $20.5 million at February 28, 2013 and $22.7 million at May 31, 2012.

Accrued interest, compensation and other consist of:

	February 28,		May 31,
In thousands	2013		2012
Interest	$	2,767	$	17,810
Compensation and employee benefits	19,017		18,103
Casualty insurance claims	16,142		14,004
Income taxes	4,890		4,500
Property taxes and other	5,318		6,900
	$	48,134	$	61,317

4. Long-Term Debt

Long-term debt consists of:

	February 28,		May 31,
In thousands	2013		2012
Senior secured revolving credit facility expiring in 2016	$	—	$	—
9.25% Senior notes due 2020 issued August 10, 2010 at par value	650,000		650,000
Other	7,879		5,778
	657,879		655,778
Capital lease obligations	2,084		2,136
Other contract obligations	245		249
	660,208		658,163
Less current portion	1,816		1,214
	$	658,392	$	656,949

Senior Secured Revolving Credit Facility. On August 25, 2011, we amended and restated our credit agreement and the associated security agreement. The credit agreement continues to provide for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit and a $15 million sub-limit for swing line loans. The credit facility matures on August 25, 2016. Amounts drawn under the credit facility bear annual interest either at the LIBOR rate plus a margin of 2.00% to 2.75% or at a base rate plus a margin of 1.0% to 1.75%. The base rate is the higher of the federal funds rate plus 0.5%, the prime rate established by Bank of America, N.A. or the one-month LIBOR rate plus 1.0%. The interest rate

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margins are determined based on the Company’s fixed charge coverage ratio. The commitment fee calculated on the unused portion of the credit facility ranges from 0.375% to 0.50% per year based on the Company’s average daily loan balance. We may terminate the credit facility at any time.

The amount that can be borrowed under the credit facility is limited to an amount called the borrowing base. The borrowing base may be less than the $200 million stated principal amount of the credit facility. The borrowing base is calculated based on the value of our accounts receivable, inventory and mobile equipment in which the lenders have a security interest. In addition, by mortgaging tracts of its real property to the lenders, the Company may increase the borrowing base by an amount beginning at $20 million and declining to $10.7 million at the maturity of the credit facility.

The borrowing base under the agreement was $148.1 million as of February 28, 2013. We are not required to maintain any financial ratios or covenants unless an event of default occurs or the unused portion of the borrowing base is less than $25 million, in which case we must maintain a fixed charge coverage ratio of at least 1.0 to 1.0. At February 28, 2013, our fixed charge coverage ratio was .48 to 1.0. Given this ratio, we may use only $123.1 million of the borrowing base as of such date. No borrowings were outstanding at February 28, 2013; however, $30.1 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of February 28, 2103 was $93.0 million.

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

The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.0 to 1.0 and borrowing availability under the borrowing base is more than $40 million. When our fixed charge coverage ratio is less than 1.0 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of February 28, 2013.

9.25% Senior Notes. On August 10, 2010, we sold $650 million aggregate principal amount of our 9.25% senior notes due 2020 at an offering price of 100%. The notes were issued under an indenture dated as of August 10, 2010. The net proceeds were used to purchase or redeem all of our outstanding 7.25% senior notes due 2013, with additional proceeds available for general corporate purposes.

At February 28, 2013, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

Year	Percentage
2015	104.625	%
2016	103.083	%
2017	101.542	%
2018 and thereafter	100.000	%

In addition, prior to August 15, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.250% of the principal amount thereof, plus accrued interest with the net cash proceeds from certain equity offerings. If we experience a change of control, we may be required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued interest.

All of our consolidated subsidiaries have unconditionally guaranteed the 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or

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sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of February 28, 2013.

Other. Principal payments due on long-term debt, excluding capital lease and other contract obligations, during each of the five years subsequent to February 28, 2013 are $1.8 million, $1.9 million, $1.9 million, $1.9 million and $0.8 million. The total amount of interest incurred was $17.4 million and $17.0 million in the three-month periods ended February 28, 2013 and February 29, 2012, respectively, of which $10.2 million and $8.5 million was capitalized. The total amount of interest incurred was $51.9 million and $51.4 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively, of which $29.4 million and $24.6 million was capitalized. The total amount of interest paid in cash was $66.0 million and $66.0 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively.

Guarantee of Joint Venture Debt. We have guaranteed 50%, or $10.5 million, of an unconsolidated joint venture’s debt which matures November 18, 2013. The joint venture was in compliance with all the terms of the debt as of February 28, 2013. See further discussion of the joint venture under Investment in Joint Venture in note 1.

5. Commitments

During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that cement demand levels in Texas at that time would permit the new kiln to operate profitably if the project was completed as originally scheduled. We resumed construction in October 2010 and began commissioning in November 2012 and should be complete in the spring of 2013. The total capital cost of the project is expected to be between $370 million and $375 million, excluding capitalized interest. As of February 28, 2013, we have incurred $370.9 million, excluding capitalized interest of $98.1 million related to the project, of which $367.3 million has been paid.

6. Shareholders’ Equity

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 40,000 shares are designated Series B Junior Participating Preferred Stock. The Series B Preferred Stock is not redeemable and ranks, with respect to the payment of dividends and the distribution of assets, junior to (i) all other series of the Preferred Stock unless the terms of any other series shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. No shares of $5 Cumulative Preferred Stock or Series B Junior Participating Preferred Stock were outstanding as of February 28, 2013.

7. Stock-Based Compensation Plans

The Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (the “2004 Plan”) provides that, in addition to other types of awards, non-qualified and incentive stock options to purchase Common Stock may be granted to employees and non-employee directors at market prices at date of grant. This plan also provides for the granting of restricted stock units ("RSUs"). In addition, non-qualified and incentive stock options remain outstanding under our 1993 Stock Option Plan.

Options become exercisable in installments beginning one year after the date of grant and expire 10 years after the date of grant. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. Options with graded vesting are valued as single awards and the compensation cost recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. No options were granted during the nine-month period ended February 28, 2013. The following table sets forth the information about the weighted-average grant date fair value of options granted during the nine-month period February 29, 2012 and the weighted-average assumptions used for such grants.

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	Nine months ended February 29,
	2012
Weighted average grant date fair value	$	13.80
Weighted average assumptions used:
Expected volatility	.450
Expected option term in years	6.7
Risk-free interest rate	1.31		%
Expected dividend yield	.02		%

Expected volatility is based on an analysis of historical volatility of our common stock. Expected option term is the period of time that options granted are expected to be outstanding and is derived by analyzing the historical option exercise experience of our optionees. Risk-free interest rate is determined using the implied yield currently available for zero coupon U.S. treasury issues with a remaining term equal to the expected term of the option. Expected dividend yield is based on the approved annual dividend rate in effect and the market price of our common stock at the time of grant.

A summary of option transactions for the nine-month periods ended February 28, 2013, follows:

	Shares Under Option		Weighted-Average Option Price
Outstanding at May 31, 2012	2,145,570		$	38.54
Exercised	(278,477	)	31.27
Canceled	(33,394	)	42.49
Outstanding at February 28, 2013	1,833,699		$	39.57
Exercisable at February 28, 2013	1,166,137		$	43.12

The following table summarizes information about stock options outstanding as of February 28, 2013.

	Range of Exercise Prices
	$16.04 - $29.38		$33.57 - $48.60		$50.63 - $70.18
Options outstanding
Shares outstanding	654,204		702,680		476,815
Weighted-average remaining life in years	6.50		5.86		3.37
Weighted-average exercise price	$	26.03	$	39.76	$	57.88
Options exercisable
Shares exercisable	306,052		383,270		476,815
Weighted-average remaining life in years	4.58		4.79		3.35
Weighted-average exercise price	$	23.25	$	40.62	$	57.87

Outstanding options expire on various dates to January 11, 2022. As of February 28, 2013, there were 2,694,873 shares available for future awards under the 2004 Plan.

As of February 28, 2013, the aggregate intrinsic value (the difference in the closing market price of our common stock of $58.05 and the exercise price to be paid by the optionee) of stock options outstanding was $35.9 million. The aggregate intrinsic value of exercisable stock options at that date was $19.5 million. The total intrinsic value for options exercised (the difference in the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) was $5.3 million and less than $0.7 million for the three-month periods ended February 28, 2013 and February 29, 2012, respectively and $6.3 million and $0.8 million for the nine-month periods ended February 28, 2013 and February 29, 2012, respectively.

We began issuing time-lapse RSUs to employees during the three-month period ended February 28, 2013. RSUs vest at the end of a four year term. We determine the fair value of time-lapse RSUs using the average stock price on the date grant, and value them as a single award with the related compensation cost recognized using a straight-line method over the vesting period adjusted for estimated forfeitures. Employees received 92,420 RSUs during the three-month period ended February 28, 2013 with a closing stock price on the date of grant of $55.79.

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We have provided additional stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments and a former stock awards program which was settled during fiscal year 2012. At February 28, 2013, outstanding stock appreciation rights totaled 133,315 shares, deferred compensation agreements to be settled in common stock totaled 4,635 shares and unvested restricted stock payments totaled 14,331 shares. Other credits include $4.1 million at May 31, 2012 representing accrued stock-based compensation which is accounted for as liabilities and expected to be settled in cash. Common stock totaling 4.5 million shares at February 28, 2013 and 2.5 million shares at May 31, 2012 have been reserved for the settlement of stock-based compensation.

Total stock-based compensation included in selling, general and administrative expense (credit) was $2.7 million and $2.9 million in the three-month periods ended February 28, 2013 and February 29, 2012, respectively and $8.2 million and $1.7 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively. Prior to effects of the January 4, 2013 stock appreciation rights agreement and the deferred compensation agreements noted below, the impact of changes in our company's stock price on stock-based awards previously accounted for as liabilities increased stock-based compensation $1.4 million and $1.7 million in the three-month period ended February 28, 2013 and February 29, 2012, respectively. The impact of changes in our company’s stock price on stock-based awards accounted for as liabilities increased stock-based compensation $4.6 million in the nine-month period ended February 28, 2013 and reduced stock-based compensation $2.1 million in the nine-month period ended February 29, 2012.

Total tax expense or benefit recognized in our statements of operations for stock-based compensation was an expense of less than $0.1 million in the three-month periods ended February 28, 2013 and February 29, 2012 and an expense less than $0.1 million in the nine-month periods ended February 28, 2013 and February 29, 2012. No cash tax benefit was realized for stock-based compensation in the nine-month periods ended February 28, 2013 and February 29, 2012.

As of February 28, 2013, and prior to the subesquent changes described below, the total unrecognized stock-based compensation expense was $13.7 million. We currently expect to recognize in the years succeeding February 28, 2013 approximately $5.0 million of this stock-based compensation expense in 2014, $3.9 million in 2015, $3.0 million in 2016 and $1.8 million in 2017

Effective January 4, 2013 the outstanding stock appreciation rights agreement was extended and modified to require settlement in shares instead of cash. Also effective December 28, 2012, deferred compensation agreements totaling 101,790 shares were settled with shares. The results of these changes were insignificant to compensation expense. In addition, as a result of the changes, the Company will no longer face volatility in compensation expense due to the changes in the Company's stock price.

8. Retirement Plans

Riverside Defined Benefit Plans. Approximately 600 employees and retirees of our subsidiary, Riverside Cement Company, are covered by a defined benefit pension plan and a postretirement health benefit plan. Unrecognized prior service costs and actuarial gains or losses for these plans are recognized in a systematic manner over the remaining service periods of active employees expected to receive benefits under these plans. The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and expenses for the three-month and nine-month periods ended February 28, 2013 and February 29, 2012, was as follows:

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	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands	2013			2012			2013			2012
Defined benefit pension plan
Service cost	$	61		$	135		$	277		$	403
Interest cost	635			760			1,978			2,280
Expected return on plan assets	(770		)	(777		)	(2,288		)	(2,331		)
Amortization of net actuarial loss	217			430			1,165			1,291
	$	143		$	548		$	1,132		$	1,643
Postretirement health benefit plan
Service cost	$	27		$	23		$	81		$	73
Interest cost	88			104			264			312
Amortization of prior service cost	(194		)	(193		)	(582		)	(581		)
Amortization of net actuarial loss	129			142			387			424
	$	50		$	76		$	150		$	228

The Riverside defined benefit pension plan (“Pension Plan”) was amended during the first quarter of fiscal year 2013. This amendment provides that all benefit accruals under the Pension Plan shall cease effective December 31, 2012 and the Pension Plan will be frozen as of that date. The amendment was designed to reduce future pension costs and provide that, effective December 31, 2012, all future benefit accruals under the Pension Plan will automatically cease for all participants, and the accrued benefits under the Pension Plan will be determined and frozen as of that date. Accordingly, as a result of these amendments, accrued pension liability was reduced by $2.2 million with an offsetting reduction in the funded status of pension liability included in accumulated other comprehensive loss.

Financial Security Defined Benefit Plans. Substantially all of our executive and certain managerial employees are covered by a series of financial security plans that are non-qualified defined benefit plans. The financial security plans require deferral of a portion of a participant’s salary and provide retirement, death and disability benefits to participants. The financial security plans are unfunded and benefits are paid as they become due. Actuarial gains or losses are recognized when incurred. The amount of financial security plan benefit expense charged to costs and expenses for the three-month and nine-month periods ended February 28, 2013 and February 29, 2012, was as follows:

	Three months ended				Nine months ended
	February 28,		February 29,		February 28,		February 29,
In thousands	2013		2012		2013		2012
Service cost	$	593	$	537	$	1,778	$	1,611
Interest cost	591		629		1,773		1,887
	$	1,184	$	1,166	$	3,551	$	3,498

The financial security defined benefit plans were amended during the second quarter of fiscal year 2013. This amendment provides that effective December 31, 2012 the Plans were frozen.

9. Income Taxes

Income taxes for the interim periods ended February 28, 2013 and February 29, 2012 have been included in the accompanying financial statements on the basis of an estimated annual rate. The tax rate differs from the 35% federal statutory corporate rate primarily due to percentage depletion that is tax deductible, state income taxes and valuation allowances against deferred tax assets. The estimated annualized rate for continuing operations is 7.9% for fiscal year 2013 compared to 2.5% for fiscal year 2012. We made no income tax payments and received no refunds in the nine-month period ended February 28, 2013. We made income tax payments of $0.1 million, and received income tax refunds of less than $0.1 million in the nine-month period ended February 29, 2012.

Net deferred tax assets totaled $12.4 million at February 28, 2013 and $13.7 million at May 31, 2012, of which $9.7 million at February 28, 2013 and $10.7 million at May 31, 2012 were classified as current. Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and records a valuation allowance unless such deferred tax assets are deemed more likely than not to be recoverable. The

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ultimate realization of these deferred tax assets depends upon various factors including the generation of taxable income during future periods. The Company’s deferred tax assets exceeded deferred tax liabilities as of February 28, 2013 and May 31, 2012 primarily as a result of recent losses. Management has concluded that the sources of taxable income we are permitted to consider do not assure the realization of the entire amount of our net deferred tax assets. Accordingly, a valuation allowance is required due to the uncertainty of realizing the deferred tax assets. We recorded a valuation allowance of $5.2 million in fiscal year 2012 through a charge to other comprehensive loss given the increase in actuarial losses in our retirement plans in 2012. We will continue to record additional valuation allowance against additions to our net deferred tax assets for fiscal year 2013 until Management believes it is more likely than not the deferred tax assets will be realized.

The amount of income tax we pay is subject to ongoing audits by federal and state authorities which may result in proposed assessments. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings, refinement of estimates, or realization of earnings or deductions that differ from our estimates. To the extent that the final outcome of a matter differs from the amount recorded, such difference generally will impact our provision for income taxes in the period that includes its final resolution. We have no significant reserves for uncertain tax positions including related interest and penalties.

In addition to our federal income tax return, we file income tax returns in various state jurisdictions. We are no longer subject to income tax examinations by federal tax authorities for years prior to 2007 and state tax authorities for years prior to 2007. The Internal Revenue Service completed their review of our federal income tax returns for 2007 through 2010 resulting in no adjustments.

10. Legal Proceedings and Contingent Liabilities

We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. It is possible that we could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by us.

In March 2008, the South Coast Air Quality Management District, or SCAQMD, informed one of our subsidiaries, Riverside Cement Company (Riverside), that it believed that operations at the Crestmore cement plant in Riverside, California caused the level of hexavalent chromium, or chrome 6, in the air in the vicinity of the plant to be elevated above ambient air levels. Chrome 6 has been identified by the State of California as a carcinogen. Riverside immediately began taking steps, in addition to its normal dust control procedures, to reduce dust from plant operations and eliminate the use of open clinker stockpiles. In February 2008, the SCAQMD placed an air monitoring station at the downwind property line closest to the open clinker stockpiles. In the SCAQMD’s first public report of the results of its monitoring, over the period of February 12 to April 9, 2008, the average level of chrome 6 was 2.43 nanograms per cubic meter, or ng/m³. Since that time, the average level has decreased. The average levels of chrome 6 reported by the SCAQMD at all of the air monitoring stations in areas around the plant, including the station at the property line, are below 1.0 ng/m³ over the entire period of time it has operated the stations. The SCAQMD compared the level of exposure at the air monitor on our property line with the following employee exposure standards established by regulatory agencies:

Occupational Safety and Health Administration	5,000 ng/m³
National Institute for Occupational Safety and Health	1,000 ng/m³
California Environmental Protection Agency	200 ng/m³

In public meetings conducted by the SCAQMD, it stated that the risk of long term exposure immediately adjacent to the plant is similar to living close to a busy freeway or rail yard, and it estimated an increased risk of 250 to 500 cancers per one million people, assuming continuous exposure for 70 years. Riverside has not determined how this particular risk number was calculated by SCAQMD. However, the Riverside Press Enterprise reported in a May 30, 2008 story that “John Morgan, a public health and epidemiology professor at Loma Linda University, said he looked at cancer cases reported from 1996 to 2005 in the census [tract] nearest the [plant] and found no excess cases. That includes lung cancer, which is associated with exposure to hexavalent chromium.”

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In late April 2008, a lawsuit was filed in Riverside County Superior Court of the State of California styled Virginia Shellman, et al. v. Riverside Cement Holdings Company, et al . The lawsuit against three of our subsidiaries purports to be a class action complaint for medical monitoring for a putative class defined as individuals who were allegedly exposed to chrome 6 emissions from our Crestmore cement plant. The complaint alleges an increased risk of future illness due to the exposure to chrome 6 and other toxic chemicals. The suit requests, among other things, establishment and funding of a medical testing and monitoring program for the class until their exposure to chrome 6 is no longer a threat to their health, as well as punitive and exemplary damages.

Since the Shellman lawsuit was filed, five additional putative class action lawsuits have been filed in the same court. The putative class in each of these cases is the same as or a subset of the putative class in the Shellman case, and the allegations and requests for relief are similar to those in the Shellman case. As a consequence, the court has stayed four of these lawsuits until the Shellman lawsuit is finally determined.

Since August 2008, additional lawsuits have been filed in the same court against Texas Industries, Inc. or one or more of our subsidiaries containing allegations of personal injury and wrongful death by approximately 3,000 individual plaintiffs who were allegedly exposed to chrome 6 and other toxic or harmful substances in the air, water and soil caused by emissions from the Crestmore plant. The court has dismissed Texas Industries, Inc. from the suits, and our subsidiaries operating in Texas have been dismissed by agreement with the plaintiffs. Most of our subsidiaries operating in California remain as defendants. The court has dismissed from these suits plaintiffs that failed to provide required information, leaving approximately 2,000 plaintiffs.

Since January 2009, additional lawsuits have been filed against Texas Industries, Inc. or one or more of our subsidiaries in the same court involving similar allegations, causes of action and requests for relief, but with respect to our Oro Grande, California cement plant instead of the Crestmore plant. The suits involve approximately 300 individual plaintiffs. Texas Industries, Inc. and our subsidiaries operating in Texas have been similarly dismissed from these suits. The court has dismissed from these suits plaintiffs that failed to provide required information, leaving approximately 250 plaintiffs. Prior to the filing of the lawsuits, the air quality management district in whose jurisdiction the plant lies conducted air sampling from locations around the plant. None of the samples contained chrome 6 levels above 1.0 ng/m³.

The plaintiffs allege causes of action that are similar from suit to suit. Following dismissal of certain causes of action by the court and amendments by the plaintiffs, the remaining causes of action typically include, among other things, negligence, intentional and negligent infliction of emotional distress, trespass, public and private nuisance, strict liability, willful misconduct, fraudulent concealment, unfair business practices, wrongful death and loss of consortium. The plaintiffs generally request, among other things, general and punitive damages, medical expenses, loss of earnings, property damages and medical monitoring costs. At the date of this report, none of the plaintiffs in these cases has alleged in their pleadings any specific amount or range of damages. Some of the suits include additional defendants, such as the owner of another cement plant located approximately four miles from the Crestmore plant or former owners of the Crestmore and Oro Grande plants. We will vigorously defend all of these suits but we cannot predict what liability, if any, could arise from them. We also cannot predict whether any other suits may be filed against us alleging damages due to injuries to persons or property caused by claimed exposure to chrome 6.

We are defendants in other lawsuits that arose in the ordinary course of business. In our judgment the ultimate liability, if any, from such legal proceedings will not have a material effect on our consolidated financial position or results of operations.

11. Business Segments

We have three business segments: cement, aggregates and consumer products. Our business segments are managed separately along product lines. Through the cement segment we produce and sell gray portland cement as our principal product, as well as specialty cements. Through the aggregates segment we produce and sell stone, sand and gravel as our principal products. Previously, the aggregates segment included our expanded shale and clay lightweight aggregates which has been classified as discontinued operations in the current period and all prior periods. Therefore, amounts for these operations are not included in the information presented below. Through the consumer products segment we produce and sell ready-mix concrete as our principal product. We account for intersegment sales at market prices. Segment operating profit consists of net sales less operating costs and expenses. Corporate includes those administrative, financial, legal, human resources, environmental and real estate activities which are not allocated to operations and are excluded from segment operating profit. Identifiable assets by segment are those assets that are used in each segment’s operation. Corporate assets consist primarily of cash and cash equivalents, real estate and other financial assets not identified with a business segment. The following is a summary of operating results and certain other financial data for our business segments.

- 20 -

	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands	2013			2012			2013			2012
Net sales
Cement
Sales to external customers	$	71,288		$	55,020		$	239,406		$	192,717
Intersegment sales	9,277			10,451			29,807			35,625
Aggregates
Sales to external customers	25,439			17,663			94,738			66,168
Intersegment sales	5,378			4,952			17,272			15,613
Consumer products
Sales to external customers	44,632			49,211			149,431			176,811
Intersegment sales	8			668			119			2,213
Eliminations	(14,663		)	(16,071		)	(47,198		)	(53,451		)
Total net sales	$	141,359		$	121,894		$	483,575		$	435,696
Segment operating profit (loss)
Cement	$	9,849		$	(2,384	)	$	24,328		$	(1,222	)
Aggregates	2,111			(1,291		)	9,629			2,494
Consumer products	(4,262		)	(4,258		)	(8,777		)	(10,204		)
Total segment operating profit	7,698			$	(7,933	)	25,180			(8,932		)
Corporate	(10,339		)	(9,880		)	(30,967		)	(22,038		)
Interest	(7,227		)	(8,512		)	(22,462		)	(26,810		)
Loss before income taxes	$	(9,868	)	$	(26,325	)	$	(28,249	)	$	(57,780	)
Depreciation, depletion and amortization
Cement	$	8,395		$	8,723		$	25,288		$	26,547
Aggregates	3,166			3,506			9,840			10,796
Consumer products	2,281			2,194			6,128			7,084
Corporate	254			295			700			903
Total depreciation, depletion and amortization	$	14,096		$	14,718		$	41,956		$	45,330
Capital expenditures
Cement	$	13,803		$	29,911		$	54,588		$	69,800
Aggregates	927			1,352			3,528			20,715
Consumer products	7,290			2,113			9,536			4,155
Corporate	201			573			1,220			1,366
Total capital expenditures	$	22,221		$	33,949		$	68,872		$	96,036
Net sales by product
Cement	$	63,811		$	47,379		$	213,215		$	167,178
Stone, sand and gravel	16,641			11,878			60,638			44,410
Ready-mix concrete	44,821			37,464			149,403			138,265
Other products	2,025			12,080			7,540			40,778
Delivery fees	14,061			13,093			52,779			45,065
Total net sales	$	141,359		$	121,894		$	483,575		$	435,696

All sales were made in the United States during the periods presented with no single customer representing more than ten percent of sales.

- 21 -

Cement segment operating profit includes a gain from the sales of emission credits associated with our Crestmore cement plant in Riverside, California of of $2.5 million in the nine-month periods ended February 28, 2013.

Consumer products operating profit includes a gain of $2.1 million in the nine-month period ended February 29, 2012 from the exchange of certain ready-mix operations in Houston, Texas for ready-mix and aggregates operations that serve the Austin, Texas metropolitan market.

Operating profit includes $2.0 million in restructuring charges in the three-month and nine-month periods ended February 29, 2012, including $1.1 million associated with our cement operations, $0.4 million associated with our aggregate operations, $0.5 million associated with our ready-mix concrete operations. An additional $1.2 million in restructuring charges in the periods is associated with our corporate activities.

Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $61.3 million and $64.9 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively, of which $38.5 million and $32.3 million was capitalized interest paid in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain existing operations were $17.8 million and $31.4 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively, of which $18.0 million was incurred to acquire aggregate reserves in the nine-month period ended February 29, 2012.

The following is a summary of assets used in each of our business segments.

In thousands	February 28, 2013		May 31, 2012
Identifiable assets
Cement	$	1,166,156	$	1,135,336
Aggregates	168,696		178,730
Consumer products	98,125		90,717
Corporate	76,725		131,801
Total assets	$	1,509,702	$	1,536,584

All of our identifiable assets are located in the United States.

12. Condensed Consolidating Financial Information

On August 10, 2010, Texas Industries, Inc. (the parent company) issued $650 million aggregate principal amount of its 9.25% senior notes due 2020. All existing consolidated subsidiaries of the parent company are 100% owned and provide a joint and several, full and unconditional guarantee of the securities. There are no significant restrictions on the parent company’s ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on a guarantor subsidiary’s ability to obtain funds from the parent company or its direct or indirect subsidiaries.

The following condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the parent company and guarantor subsidiaries. The information has been presented as if the parent company accounted for its ownership of the guarantor subsidiaries using the equity method of accounting. Prior period information has been reclassified to conform to the current period presentation.

- 22 -

In thousands	Texas Industries, Inc.		Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Condensed consolidating balance sheet at February 28, 2013
Cash and cash equivalents	$	26,415	$	5,249	$	—		$	31,664
Receivables – net	—		98,458		—			98,458
Inventories	—		100,282		—			100,282
Deferred income taxes and prepaid expenses	864		19,092		326			20,282
Discontinued operations held for sale	—		38,769		—			38,769
Total current assets	27,279		261,850		326			289,455
Property, plant and equipment – net	—		1,212,136		—			1,212,136
Goodwill	—		1,715		—			1,715
Real estate and investments	1,605		21,419		—			23,024
Deferred income taxes and other charges	121,277		7,899		(107,035		)	22,141
Investment in subsidiaries	1,025,238		—		(1,025,238		)	—
Long-term intercompany receivables	251,191		18,740		(269,931		)	—
Total assets	$	1,426,590	$	1,523,759	$	(1,401,878	)	$	1,548,471
Accounts payable	$	75	$	56,925	$	—		$	57,000
Accrued interest, compensation and other	10,644		37,164		326			48,134
Current portion of long-term debt	—		1,816		—			1,816
Total current liabilities	10,719		95,905		326			106,950
Long-term debt	650,245		8,147		—			658,392
Long-term intercompany payables	18,740		251,191		(269,931		)	—
Deferred income taxes	—		107,035		(107,035		)	—
Other credits	51,846		36,242		—			88,088
Shareholders’ equity	695,040		1,025,239		(1,025,238		)	695,041
Total liabilities and shareholders’ equity	$	1,426,590	$	1,523,759	$	(1,401,878	)	$	1,548,471

- 23 -

In thousands	Texas Industries, Inc.		Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Condensed consolidating balance sheet at May 31, 2012
Cash and cash equivalents	$	84,713	$	3,314	$	—		$	88,027
Receivables – net	—		98,836		—			98,836
Inventories	—		99,441		—			99,441
Deferred income taxes and prepaid expenses	99		18,908		—			19,007
Discontinued operations held for sale	—		40,344		—			40,344
Total current assets	84,812		260,843		—			345,655
Property, plant and equipment – net	—		1,185,325		—			1,185,325
Goodwill	—		1,715		—			1,715
Real estate and investments	664		20,201		—			20,865
Deferred income taxes and other charges	123,734		7,356		(107,722		)	23,368
Investment in subsidiaries	987,519		—		(987,519		)	—
Long-term intercompany receivables	246,298		18,747		(265,045		)	—
Total assets	$	1,443,027	$	1,494,187	$	(1,360,286	)	$	1,576,928
Accounts payable	$	108	$	64,717	$	—		$	64,825
Accrued interest, compensation and other	25,829		35,488		—			61,317
Current portion of long-term debt	4		1,210		—			1,214
Total current liabilities	25,941		101,415		—			127,356
Long-term debt	650,245		6,704		—			656,949
Long-term intercompany payables	18,747		246,298		(265,045		)	—
Deferred income taxes	—		107,722		(107,722		)	—
Other credits	51,823		44,529		—			96,352
Shareholders’ equity	696,271		987,519		(987,519		)	696,271
Total liabilities and shareholders’ equity	$	1,443,027	$	1,494,187	$	(1,360,286	)	$	1,576,928

- 24 -

In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Condensed consolidating statement of comprehensive income for the three months ended February 28, 2013
Net sales	$	—		$	141,359		$	—		$	141,359
Cost of products sold	—			129,035			—			129,035
	—			12,324			—			12,324
Selling, general and administrative	2,762			14,294			—			17,056
Interest	17,309			—			(10,082		)	7,227
Other income	(13		)	(2,078		)	—			(2,091		)
Intercompany other income	(863		)	(9,219		)	10,082			—
	19,195			2,997			—			22,192
Income (loss) from continuing operations before the following items	(19,195		)	9,327			—			(9,868		)
Income taxes (benefit)	517			(1,872		)	—			(1,355		)
	(19,712		)	11,199			—			(8,513		)
Equity in earnings of subsidiaries	13,898			—			(13,898		)	—
Net income (loss)	$	(5,814	)	$	11,199		$	(13,898	)	$	(8,513	)
Net income (loss) from discontinued operations, net of tax	$	—		$	2,699		$	—		$	2,699
Net income (loss)	$	(5,814	)	$	13,898		$	(13,898	)	$	(5,814	)
Comprehensive loss	$	(5,814	)	$	13,994		$	(13,898	)	$	(5,718	)

In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Condensed consolidating statement of comprehensive income for the three months ended February 29, 2012
Net sales	$	—		$	121,894		$	—		$	121,894
Cost of products sold	—			123,774			—			123,774
	—			(1,880		)	—			(1,880		)
Selling, general and administrative	2,330			14,935			—			17,265
Restructuring charges	—			—			—			—
Interest	17,016			—			(8,504		)	8,512
Other income	(16		)	(1,316		)	—			(1,332		)
Intercompany other income	(863		)	(7,641		)	8,504			—
	18,467			5,978			—			24,445
Income (loss) from continuing operations before the following items	(18,467		)	(7,858		)	—			(26,325		)
Income taxes (benefit)	(9,139		)	7,991			—			(1,148		)
	(9,328		)	(15,849		)	—			(25,177		)
Equity in earnings of subsidiaries	(14,952		)	—			14,952			—
Net income (loss)	$	(24,280	)	$	(15,849	)	$	14,952		$	(25,177	)
Net income (loss) from discontinued operations, net of tax	$	—		$	897		$	—		$	897
Net income (loss)	$	(24,280	)	$	(14,952	)	$	14,952		$	(24,280	)
Comprehensive loss	$	(24,280	)	$	(14,712	)	$	14,952		$	(24,040	)

- 25 -

In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Condensed consolidating statement of comprehensive income for the nine months ended February 28, 2013
Net sales	$	—		$	483,575		$	—		$	483,575
Cost of products sold	—			444,297			—			444,297
Gross profit (loss)	—			39,278			—			39,278
Selling, general and administrative	7,446			44,233			—			51,679
Interest	51,545			—			(29,083		)	22,462
Other income	(62		)	(6,552		)	—			(6,614		)
Intercompany other income	(2,618		)	(26,465		)	29,083			—
	56,311			11,216			—			67,527
Income (loss) from continuing operations before the following items	(56,311		)	28,062			—			(28,249		)
Income taxes (benefit)	441			(2,592		)	—			(2,151		)
	(56,752		)	30,654			—			(26,098		)
Equity in earnings of subsidiaries	37,159			—			(37,159		)	—
Net income (loss) from continuing operations	$	(19,593	)	$	30,654		$	(37,159	)	$	(26,098	)
Net income (loss) from discontinued operations, net of tax	$	—		$	6,504		$	—		$	6,504
Net Income (loss)	$	(19,593	)	$	37,158		$	(37,159	)	$	(19,594	)
Comprehensive loss	$	(19,593	)	$	37,719		$	(37,159	)	$	(19,033	)

In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Condensed consolidating statement of comprehensive income for the nine months ended February 29, 2012
Net sales	$	—		$	435,696		$	—		$	435,696
Cost of products sold	—			425,464			—			425,464
Gross profit (loss)	—			10,232			—			10,232
Selling, general and administrative	3,583			43,191			—			46,774
Restructuring charges				3,153						3,153
Interest	51,281			—			(24,471		)	26,810
Other income	(43		)	(8,682		)	—			(8,725		)
Intercompany other income	(2,618		)	(21,853		)	24,471			—
	52,203			15,809			—			68,012
Income (loss) from continuing operations before the following items	(52,203		)	(5,577		)	—			(57,780		)
Income taxes (benefit)	(12,673		)	10,072			—			(2,601		)
	(39,530		)	(15,649		)	—			(55,179		)
Equity in earnings of subsidiaries	(13,207		)	—			13,207			—
Net income (loss) from continuing operations	$	(52,737	)	$	(15,649	)	$	13,207		$	(55,179	)
Net income (loss) from discontinued operations, net of tax	$	—		$	2,442		$	—		$	2,442
Net Income (loss)	$	(52,737	)	$	(13,207	)	$	13,207		$	(52,737	)
Comprehensive loss	$	(52,737	)	$	(12,488	)	$	13,207		$	(52,018	)

- 26 -

In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Condensed consolidating statement of cash flows for the nine months ended February 28, 2013
Net cash provided (used) by operating activities	$	(88,158	)	$	97,929		$	—	$	9,771
Investing activities									—
Capital expenditures – expansions	—			(61,344		)	—		(61,344		)
Capital expenditures – other	—			(17,752		)	—		(17,752		)
Proceeds from asset disposals	—			5,783			—		5,783
Investments in life insurance contracts	2,366			—			—		2,366
Other – net	—			(67		)	—		(67		)
Net cash provided (used) by investing activities	2,366			(73,380		)	—		(71,014		)
Financing activities									—
Long-term borrowings	—			—			—		—
Debt payments	(4		)	(2,232		)	—		(2,236		)
Debt issuance costs	—			—			—		—
Stock option exercises	7,116			—			—		7,116
Common dividends paid	—			—			—		—
Net intercompany financing activities	20,382			(20,382		)	—		—
Net cash provided (used) by financing activities	27,494			(22,614		)	—		4,880
Increase (decrease) in cash and cash equivalents	(58,298		)	1,935			—		(56,363		)
Cash and cash equivalents at beginning of period	84,713			3,314			—		88,027
Cash and cash equivalents at end of period	$	26,415		$	5,249		$	—	$	31,664

In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Condensed consolidating statement of cash flows for the nine months ended February 29, 2012
Net cash provided (used) by operating activities	$	(65,811	)	$	67,933		$	—	$	2,122
Investing activities									—
Capital expenditures – expansions	—			(64,901		)	—		(64,901		)
Capital expenditures – other	—			(31,394		)	—		(31,394		)
Proceeds from asset disposals	—			4,188			—		4,188
Investments in life insurance contracts	3,354			—			—		3,354
Other – net	—			(302		)	—		(302		)
Net cash provided (used) by investing activities	3,354			(92,409		)	—		(89,055		)
Financing activities									—
Long-term borrowings	—			—			—		—
Debt payments	(19		)	(154		)	—		(173		)
Debt issuance costs	(1,829		)	—			—		(1,829		)
Stock option exercises	1,749			—			—		1,749
Common dividends paid	(2,091		)	—			—		(2,091		)
Net intercompany financing activities	(24,562		)	24,562			—		—
Net cash provided (used) by financing activities	(26,752		)	24,408			—		(2,344		)
Increase (decrease) in cash and cash equivalents	(89,209		)	(68		)	—		(89,277		)
Cash and cash equivalents at beginning of period	113,898			2,534			—		116,432
Cash and cash equivalents at end of period	$	24,689		$	2,466		$	—	$	27,155

- 27 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Texas Industries, Inc.

We have reviewed the accompanying consolidated balance sheet of Texas Industries, Inc. and subsidiaries (the Company) as of February 28, 2013, and the related consolidated statements of operations and comprehensive loss for the three- and nine-month periods ended February 28, 2013 and February 29, 2012 and the consolidated statements of cash flows for the nine-month periods ended February 28, 2013 and February 29, 2012. 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 consolidated interim financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2012, 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 July 17, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of May 31, 2012, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Fort Worth, Texas

March 28 , 2013

- 28 -

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

When used in this report the terms “Company,” “we,” “us” or “our” mean Texas Industries, Inc. and subsidiaries unless the context indicates otherwise.

RESULTS OF OPERATIONS

We are a leading supplier of heavy construction materials in the southwestern United States through our three business segments: cement, aggregates and consumer products. Our principal products are gray portland cement, produced and sold through our cement segment; stone, sand and gravel, produced and sold through our aggregates segment; and ready-mix concrete, produced and sold through our consumer products segment. Our facilities are concentrated primarily in Texas, Louisiana and California.

Management uses segment operating profit as its principal measure to assess performance and to allocate resources. Business segment operating profit consists of net sales less operating costs and expenses that are directly attributable to the segment. Corporate includes non-operating income and expenses related to administrative, financial, legal, human resources, environmental and real estate activities.

During the nine-month period ended February 28, 2013, construction activity has continued to show a positive trend though levels remain well below pre-recession highs in both our California and Texas market areas. We have remained focused on reducing costs, and on managing our cash position as well as production levels, which we believe has had a significant positive impact on our operating results.

In July 2011 we entered into an asset exchange transaction in which we acquired the ready-mix and aggregate operations of CEMEX USA that serve the Austin, Texas metropolitan market. In exchange for the three ready-mix plants and one sand and gravel plant, we transferred to CEMEX USA certain of our ready-mix operations in Houston, Texas. With the completion of this transaction we have exited the Houston, Texas ready-mix market. The operating results of the acquired ready-mix and sand and gravel operations are reported in our consumer products and aggregate segments, respectively.

In November 2011 we entered into a joint venture agreement with Ratliff Ready-Mix, L.P., a ready-mix operator based in Waco, Texas. We contributed seven of our central Texas ready-mix plants and certain related assets to the joint venture and guaranteed 50%, or $10.5 million of the debt of the joint venture’s debt which matures November 18, 2013. In addition to our 50% guarantee of the joint venture’s debt, 100% of the debt is guaranteed by the other partner and secured by the underlying assets of the joint venture. The joint venture was in compliance with all the terms of the debt as of February 28, 2013. The day to day business operations are managed by the 60% partner in the venture. The joint venture owns a total of twenty three ready-mix plants and serves the central Texas market. We supply cement to the joint venture. The joint venture operations are reported in our consumer products segment using the equity method of accounting.

In April 2012, we sold our Texas based packaged products operations to Bonsal American, a unit of Oldcastle, Inc. The transaction included five production facilities in the Dallas-Fort Worth Metroplex, the Houston metro area, and the Austin/Central Texas region. We entered into a long-term cement supply agreement with Bonsal American as a part of the transaction.

On March 22, 2013, our subsidiaries exchanged their expanded shale and clay lightweight aggregates manufacturing business for the ready-mix concrete business of subsidiaries of Trinity Industries, Inc. in east Texas and southwest Arkansas. Pursuant to the agreements, we transferred our expanded shale and clay manufacturing facilities in Streetman, Texas; Boulder, Colorado and Frazier Park, California; and our DiamondPro® product line in exchange for 42 ready-mix concrete plants stretching from Texarkana to Beaumont in east Texas and in southwestern Arkansas, two aggregate distribution facilities in Beaumont and Port Arthur, Texas, and related assets. We anticipate recognizing a gain on the transaction, the amount of which is still being finalized and will be included in the results for our discontinued operations in our fourth quarter 2013. The operational results for expanded shale and clay lightweight aggregates manufacturing business are reported as discontinued operations for the periods represented in this filing. See discussion in note 2.

Consolidated net sales for the three-month period ended February 28, 2013 were $141.4 million, an increase of $19.5 million from the prior year period. Consolidated cost of products sold for the three-month period ended February 28, 2013 was $129.0 million, an increase of $5.3 million from the prior year period. Increased sales were primarily due to higher shipments in all major products and higher average price in all major products. Increase in cost of products sold is primarily due to cost associated with higher shipments and cement repair and maintenance costs. Consolidated gross profit for the three-month period ended February 28, 2013 was $12.3 million and consolidated gross loss for the three-month period ended February 29, 2012 was $(1.9) million.

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Consolidated net sales for the nine-month period ended February 28, 2013 were $483.6 million, an increase of $47.9 million from the prior year period. Consolidated cost of products sold for the nine-month period ended February 29, 2012 was $444.3 million, an increase of $18.8 million from the prior year period. Increased sales were primarily due to higher cement and aggregates shipments and higher average price in all major products. Increase in cost of products sold is primarily due to cost associated with higher shipments and cement repair and maintenance costs. Consolidated gross profit for the nine-month periods ended February 28, 2013 and February 29, 2012 was $39.3 million and $10.2 million, respectively.

Consolidated restructuring charges of $3.2 million were recorded in the nine-month period ended February 29, 2012. These charges consist primarily of severance and benefit costs associated with the various workforce reduction initiatives.

Consolidated selling, general and administrative expenses for the three-month period ended February 28, 2013 were $17.1 million, a decrease of $0.2 million from the prior year period.

Consolidated selling, general and administrative expenses for the nine-month period ended February 28, 2013 were $51.7 million, an increase of $4.9 million from the prior year period. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on the fair value of these awards increased expense $8.8 million from the prior period. This increase was offset by a decrease in restructuring charges from the prior period of $3.2 million that primarily included severance and benefit costs associated with the various workforce reduction initiatives and a decrease in controllable expenses of $0.7 million.

Consolidated other income for the three-month period ended February 28, 2013 was $2.1 million, an increase of $0.8 million from the prior year period. Other income includes earnings from a joint venture of $0.5 million in the three-month period ended February 28, 2013.

Consolidated other income for the nine-month period ended February 28, 2013 was $6.6 million, a decrease of $2.1 million from the prior year period. The July 2011 asset exchange resulted in the recognition of a gain of $2.1 million in the nine-month period ended February 29, 2012.

Net Income from discontinued operations for the three-month period ended February 28, 2013 was $4.2 million, an increase of $2.7 million from the prior year on higher shipments from expanded shale and clay lightweight aggregates.

Net Income from discontinued operations for the nine-month period ended February 28, 2013 was $10.1 million, an increase of $6.3 million from the prior year period on higher shipments from expanded shale and clay lightweight aggregates.

Total segment operating profit for the three-month period ended February 28, 2013 was $7.7 million. Total segment operating loss for the three-month period ended February 29, 2012 was $(7.9) million. Total segment operating profit for the nine-month period ended February 28, 2013 was $25.2 million. Total segment operating loss for the nine-month period ended February 29, 2012 was $(8.9) million.

The following is a summary of operating results for our business segments and certain other information related to our principal products and non-operating expenses.

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Cement Operations

	Three months ended						Nine months ended
	February 28,			February 29			February 28,			February 29,
In thousands except per unit	2013			2012			2013			2012
Operating Results
Cement sales	$	73,086		$	57,830		$	242,983		$	202,802
Other sales and delivery fees	7,480			7,641			26,230			25,540
Total segment sales	80,566			65,471			269,213			228,342
Cost of products sold	68,501			63,359			237,326			219,641
Gross profit	12,065			2,112			31,887			8,701
Selling, general and administrative	(3,247		)	(4,663		)	(10,520		)	(12,906		)
Restructuring charges	—			—			—			(1,074		)
Other income	1,031			167			2,961			4,057
Operating Profits (Loss)	$	9,849		$	(2,384	)	$	24,328		$	(1,222	)
Cement
Shipments (tons)	933			743			3,086			2,596
Prices ($/ton)	$	78.39		$	77.76		$	78.75		$	78.11
Cost of sales ($/ton)	$	64.35		$	75.95		$	68.62		$	75.20

Three months ended February 28, 2013

Cement operating profit (loss) for the three-month periods ended February 28, 2013 and February 29, 2012 was $9.8 million and $(2.4) million, respectively.

Total segment sales for the three-month period ended February 28, 2013 were $80.6 million compared to $65.5 million for the prior year period. Cement sales increased $15.1 million from the prior year period. Our Texas market area accounted for approximately 71% of cement sales in the current period compared to 69% of cement sales in the prior year period. Average cement prices increased 2% in our Texas market from the prior year period. Average cement prices decreased 3% due to a change in product mix in our California market from the prior year period. Shipments increased 27% in our Texas market area and 22% in our California market area.

Cost of products sold for the three-month period ended February 28, 2013 increased $5.1 million from the prior year period primarily due to higher shipments. Cement unit cost of sales decreased 15% from prior year period primarily due to higher shipments offset slightly by higher fuel and power costs.

Selling, general and administrative expense for the three-month period ended February 28, 2013 decreased $1.4 million from the prior year period primarily due to our work force reduction initiatives.

Other income for the three-month period ended February 28, 2013 increased $0.9 million from the prior year period primarily due to higher royalties.

Nine months ended February 28, 2013

Cement operating profit (loss) for the nine-month periods ended February 28, 2013 and February 29, 2012 was $24.3 million and $(1.2) million, respectively.

Total segment sales for the nine-month period ended February 28, 2013 were $269.2 million compared to $228.3 million for the prior year period. Cement sales increased $40.9 million from the prior year period. Our Texas market area accounted for approximately 69% of cement sales in the current period compared to 68% of cement sales in the prior year period. Average cement prices increased 3% in our Texas market from the prior year period. Average cement prices decreased 4% due to a change in product and customer mix in our California market from the prior year period. Shipments increased 18% in our Texas market area and 20% in our California market area.

Cost of products sold for the nine-month period ended February 28, 2013 increased $17.7 million from the prior year period primarily due to higher shipments. Cement unit cost of sales decreased 8% from the prior year period primarily due to higher shipments.

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Selling, general and administrative expense for the nine-month period ended February 28, 2103 decreased $2.4 million from the prior year period primarily due to our work force reduction initiatives.

Restructuring charges of $1.1 million were recorded in the nine-month period ended February 29, 2012. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the nine-month period ended February 28, 2013 decreased $1.1 million from the prior year period. The sales of emission credits associated with our Crestmore cement plant in Riverside, California resulted in a gain of $2.5 million in the nine-month period ended February 29, 2012.

Aggregates Operations

	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands except per unit	2013			2012			2013			2012
Operating Results
Stone, sand and gravel sales	$	22,021		$	16,829		$	77,911		$	60,022
Delivery fees	8,799			5,787			34,101			21,758
Total segment sales	30,820			22,616			112,012			81,780
Cost of products sold	28,106			23,825			100,294			76,203
Gross profit	2,714			(1,209		)	11,718			5,577
Selling, general and administrative	(900		)	(1,341		)	(2,763		)	(4,441		)
Restructuring charges	—			—			—			(374		)
Other income	295			1,259			674			1,732
Operating Profit (Loss)	$	2,109		$	(1,291	)	$	9,629		$	2,494
Stone, sand and gravel
Shipments (tons)	3,029			2,363			10,751			8,324
Prices ($/ton)	$	7.27		$	7.12		$	7.25		$	7.21
Cost of sales ($/ton)	$	6.46		$	7.47		$	6.12		$	6.62

Previously, the aggregates segment included our expanded shale and clay lightweight aggregates operations which has been classified as discontinued operations in the current period and all prior periods. Therefore, amounts for these operations are not included in the information presented.

On March 22, 2013, our subsidiaries exchanged their expanded shale and clay lightweight aggregates manufacturing business for the ready-mix concrete business of subsidiaries of Trinity Industries, Inc. in east Texas and southwest Arkansas. Pursuant to the agreements, we transferred our expanded shale and clay manufacturing facilities in Streetman, Texas; Boulder, Colorado and Frazier Park, California; and our DiamondPro® product line in exchange for 42 ready-mix concrete plants stretching from Texarkana to Beaumont in east Texas and in southwestern Arkansas, two aggregate distribution facilities in Beaumont and Port Arthur, Texas, and related assets. We anticipate recognizing a gain on the transaction, the amount of which is still being finalized and will be included in the results for our discontinued operations in our fourth quarter 2013.

Three months ended February 28, 2013

Aggregates operating profit for the three-month period ended February 28, 2013 was $2.1 million and operating loss for the three-month period ended February 29, 2012 was $(1.3) million.

Total segment sales for the three-month period ended were $30.8 million compared to $22.6 million for the prior year period. Stone, sand and gravel sales increased $8.2 million from the prior year period on 28% higher shipments.

Cost of products sold for the three-month period ended February 28, 2013 increased $4.3 million from the prior year period primarily due to increased stone, sand and gravel shipments. Stone, sand and gravel unit costs decreased 14% from the prior year period primarily due to the effect of higher shipments on unit costs.

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Selling, general and administrative expense for the three-month period ended February 28, 2013 decreased $0.4 million from the prior year period primarily due to our work force reduction initiatives.

Nine months ended February 28, 2013

Aggregates operating profit for the nine-month periods ended February 28, 2013 and February 29, 2012 was $9.6 million and $2.5 million, respectively.

Total segment sales for the nine-month period ended February 28, 2013 were $112.0 million compared to $81.8 million for the prior year period. Stone, sand and gravel sales increased $30.2 million from the prior year period on 29% higher shipments.

Cost of products sold for the nine-month period ended February 28, 2013 increased $24.1 million from the prior year period primarily due to increased stone, sand and gravel shipments. Stone, sand and gravel unit costs decreased 8% from the prior year period primarily due to the effect of higher shipments on unit costs.

Selling, general and administrative expense for the nine-month period ended February 28, 2013 decreased $1.7 million from the prior year period primarily due to our work force reduction initiatives.

Restructuring charges of $0.4 million were recorded in the nine-month period ended February 29, 2012. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Consumer Products Operations

	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands except per unit	2013			2012			2013			2012
Operating Results
Ready-mix concrete sales	$	44,582		$	37,481		$	149,276		$	138,288
Package products sales and delivery fees	46			12,398			274			40,736
Total segment sales	44,628			49,879			149,550			179,024
Cost of products sold	47,081			52,663			153,877			183,072
Gross loss	(2,453		)	(2,784		)	(4,327		)	(4,048		)
Selling, general and administrative	(2,475		)	(1,297		)	(7,239		)	(8,107		)
Restructuring charges	—			—			—			(536		)
Other income	666			(177		)	2,789			2,487
Operating Loss	$	(4,262	)	$	(4,258	)	$	(8,777	)	$	(10,204	)
Ready-mix concrete
Shipments (cubic yards)	541			508			1,833			1,836
Prices ($/cubic yard)	$	82.49		$	73.80		$	81.46		$	75.31
Cost of sales ($/cubic yard)	$	87.04		$	81.87		$	83.88		$	80.29

Three months ended February 28, 2013

Consumer products operating loss for the three-month periods ended February 28, 2013 and February 29, 2012 was $(4.3) million and $(4.3) million, respectively.

Total segment sales for the three-month period ended February 28, 2013 were $44.6 million compared to $49.9 million for the prior year period. Segment sales decreased $5.3 million from the prior year period due to the sale of our Texas-based package products operations. Ready-mix concrete sales from ongoing operations increased $7.1 million from the prior year period on 6% higher shipments and12% higher average prices.

Cost of products sold for the three-month period ended February 28, 2013 decreased $5.6 million from the prior year period primarily due to the sale of our package products operations. Ready-mix concrete unit costs increased 6% from the prior year period on higher maintenance, diesel and material costs.

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Selling, general and administrative expense for the three-month period ended February 28, 2013 increased $1.2 million from the prior year period due to insurance costs related to a prior event.

Other income for the three-month period ended February 28, 2013 increased $0.8 million from the prior year period primarily due to earnings from joint venture of $0.5 million.

Nine months ended February 28, 2013

Consumer products operating loss for the nine-month periods ended February 28, 2013 and February 29, 2012 was $(8.8) million and $(10.2) million, respectively.

Total segment sales for the nine-month period ended February 28, 2013 were $149.6 million compared to $179.0 million for the prior year period. Segment sales decreased $29.4 million from the prior year period due to the effect of exiting the Houston, Texas ready-mix market and the sale of our Texas-based package products operations. Ready-mix concrete sales increased $11.0 million from the prior year period on 8.2% higher average prices.

Cost of products sold for the nine-month period ended February 28, 2013 decreased $29.2 million from the prior year period primarily due to the sale of our Texas-based package products operation and having exited the Houston ready-mix market. Ready-mix concrete unit costs increased 5% from the prior year period on higher material and diesel costs.

Selling, general and administrative expense for the nine-month period ended February 28, 2013 decreased $0.9 million from the prior year period primarily due to the effect of the sale of our Texas-based package products operations and our work force reduction initiatives.

Restructuring charges of $0.5 million were recorded in the nine-month period ended February 29, 2012. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Other income for the nine-month period ended February 28, 2013 decreased $0.3 million from the prior year period. Earnings from the joint venture of $1.6 million were recognized in the nine-month period ended February 28, 2013. Gain of $2.1 million from the disposition of the Houston ready-mix operations was recognized in the nine-month period ended February 29, 2012.

Corporate

	Three months ended						Nine months ended
	February 28,			February 29,			February 28,			February 29,
In thousands	2013			2012			2013			2012
Other income	$	98		$	84		$	190		$	450
Selling, general and administrative	(10,437		)	(9,964		)	(31,157		)	(21,319		)
Restructuring charges	—			—			—			(1,169		)
	$	(10,339	)	$	(9,880	)	$	(30,967	)	$	(22,038	)

Three months ended February 28, 2013

Other income for the three-month period ended February 28, 2013 remains relatively unchanged from prior year period on flat oil and gas royalty payments.

Selling, general and administrative expense for the three-month period ended February 28, 2013 increased $0.5 million from the prior year period.

Nine months ended February 28, 2013

Other income for the nine-month period ended February 28, 2013 decreased $0.3 million from the prior year period primarily due to lower oil and gas royalty payments.

Selling, general and administrative expense for the nine-month period ended February 28, 2013 increased $9.8 million from the prior year period. Stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on the fair value of these awards increased expense $8.8 million for the nine-month period ended February 28, 2013 and the realignment of administration functions resulted in approximately 1.0 million higher expense.

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Restructuring charges of $1.2 million were recorded for the nine-month period ended February 29, 2012. These charges consist primarily of severance and benefit costs associated with various workforce reduction initiatives.

Interest

Interest expense incurred for the three-month period ended February 28, 2013 was $17.4 million, of which $10.2 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $7.2 million was expensed. Interest expense incurred for the three-month period ended February 29, 2012 was $17.0 million, of which $8.5 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $8.5 million was expensed.

Interest expense incurred for the nine-month period ended February 28, 2013 was $51.9 million, of which $29.4 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $22.5 million was expensed. Interest expense incurred for the nine-month period ended February 29, 2012 was $51.4 million, of which $24.6 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $26.8 million was expensed.

Interest expense to be capitalized in connection with our Hunter, Texas cement plant expansion project during the remainder of our current fiscal year is expected to be between $7 million and $11 million.

Income Taxes

Income taxes for the interim periods ended February 28, 2013 and February 29, 2012 have been included in the accompanying financial statements on the basis of an estimated annual rate. The tax rate differs from the 35% federal statutory corporate rate primarily due to percentage depletion that is tax deductible, state income taxes and valuation allowances against deferred tax assets. The estimated annualized rate for continuing operations is 7.9% for fiscal year 2013 compared to 2.5% for fiscal year 2012. We made no income tax payments and received no refunds n the nine-month period ended February 28, 2013. We made income tax payments of $0.1 million, and received income tax refunds of less than $0.1 million in the nine-month period ended February 29, 2012.

Net deferred tax assets totaled $12.4 million at February 28, 2013 and $13.7 million at May 31, 2012, of which $9.7 million at February 28, 2013 and $10.7 million at May 31, 2012 were classified as current. Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and records a valuation allowance unless such deferred tax assets are deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets depends upon various factors including the generation of taxable income during future periods. The Company’s deferred tax assets exceeded deferred tax liabilities as of February 28, 2013 and May 31, 2012 primarily as a result of recent losses. Management has concluded that the sources of taxable income we are permitted to consider do not assure the realization of the entire amount of our net deferred tax assets. Accordingly, a valuation allowance is required due to the uncertainty of realizing the deferred tax assets. We recorded a valuation allowance of $5.2 million in fiscal year 2012 through a charge to other comprehensive loss given the increase in actuarial losses in our retirement plans in 2012. We will continue to record additional valuation allowance against additions to our net deferred tax assets for fiscal year 2013 until Management believes it is more likely than not the deferred tax assets will be realized.

The amount of income tax we pay is subject to ongoing audits by federal and state authorities which may result in proposed assessments. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings, refinement of estimates, or realization of earnings or deductions that differ from our estimates. To the extent that the final outcome of a matter differs from the amount recorded, such difference generally will impact our provision for income taxes in the period that includes its final resolution. We have no significant reserves for uncertain tax positions including related interest and penalties.

In addition to our federal income tax return, we file income tax returns in various state jurisdictions. We are no longer subject to income tax examinations by federal tax authorities for years prior to 2007 and state tax authorities for years prior to 2007. Our federal income tax returns for 2007 through 2010 are currently under examination. We do not anticipate that any adjustments that may result from this examination would have a material effect on our financial position or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital. Working capital includes held-for-sale assets pertaining to the December 4, 2012 agreement in which agreed to exchange our expanded shale and clay lightweight aggregates assets for ready-mix operating assets, which include property, plant and equipment. Working capital totaled $182.5 million at February 28, 2013 compared to $218.3 million at May 31, 2012, a decrease of $35.8 million. Cash decreased $56.3 million due to property tax and interest payments.

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In addition to cash and cash equivalents of $31.7 million at February 28, 2013, our sources of liquidity include cash from operations and borrowings available under our senior secured revolving credit facility.

Senior Secured Revolving Credit Facility. On August 25, 2011, we amended and restated our credit agreement and the associated security agreement. The credit agreement continues to provide for a $200 million senior secured revolving credit facility with a $50 million sub-limit for letters of credit and a $15 million sub-limit for swing line loans. The credit facility matures on August 25, 2016. Amounts drawn under the credit facility bear annual interest either at the LIBOR rate plus a margin of 2.0% to 2.75% or at a base rate plus a margin of 1.0% to 1.75%. The base rate is the higher of the federal funds rate plus 0.5%, the prime rate established by Bank of America, N.A. or the one-month LIBOR rate plus 1.0%. The interest rate margins are determined based on the Company’s fixed charge coverage ratio. The commitment fee calculated on the unused portion of the credit facility ranges from 0.375% to 0.50% per year based on the Company’s average daily loan balance. We may terminate the credit facility at any time.

The amount that can be borrowed under the credit facility is limited to an amount called the borrowing base. The borrowing base may be less than the $200 million stated principal amount of the credit facility. The borrowing base is calculated based on the value of our accounts receivable, inventory and mobile equipment in which the lenders have a security interest. In addition, by mortgaging tracts of its real property to the lenders, the Company may increase the borrowing base by an amount beginning at $20 million and declining to $10.7 million at the maturity of the credit facility.

The borrowing base under the agreement was $148.1 million as of February 28, 2013. We are not required to maintain any financial ratios or covenants unless an event of default occurs or the unused portion of the borrowing base is less than $25 million, in which case we must maintain a fixed charge coverage ratio of at least 1.0 to 1.0. At February 28, 2013, our fixed charge coverage ratio was .48 to 1.0. Given this ratio, we may use only $123.1 million of the borrowing base as of such date. No borrowings were outstanding at February 28, 2013; however, $30.1 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of February 28, 2013 was $93.0 million.

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

The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.0 to 1.0 and borrowing availability under the borrowing base is more than $40 million. When our fixed charge coverage ratio is less than 1.0 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of February 28, 2013.

9.25% Senior Notes. On August 10, 2010, we sold $650 million aggregate principal amount of our 9.25% senior notes due 2020 at an offering price of 100%. The notes were issued under an indenture dated as of August 10, 2010. The net proceeds were used to purchase or redeem all of our outstanding 7.25% senior notes due 2013, with additional proceeds available for general corporate purposes.

At February 28, 2013, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

Year	Percentage
2015	104.625	%
2016	103.083	%
2017	101.542	%
2018 and thereafter	100.000	%

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In addition, prior to August 15, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.250% of the principal amount thereof, plus accrued interest with the net cash proceeds from certain equity offerings. If we experience a change of control, we may be required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued interest.

All of our consolidated subsidiaries have unconditionally guaranteed the 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of February 28, 2013.

Contractual Obligations. As of February 28, 2013, there have been no material changes to our material contractual obligations described in our Annual Report on Form 10-K for the year ended May 31, 2012.

During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that cement demand levels in Texas at that time would permit the new kiln to operate profitably if the project was completed as originally scheduled. We resumed construction in October 2010 and began commissioning in November 2012 and should be complete in the spring of 2013. The total capital cost of the project is expected to be between $370 million and $375 million, excluding capitalized interest. As of February 28, 2013, we have incurred $370.9 million, excluding capitalized interest of $98.1 million related to the project, of which $464.1 million has been paid.

For the next year, we expect cash and cash equivalents, cash from operations, and available borrowings under our senior secured revolving credit facility to be sufficient to provide funds for capital expenditure commitments currently estimated at $25 million to $35 million, capital expenditures for the Hunter plant expansion, scheduled debt payments, working capital needs and other general corporate purposes.

Cash Flows

Net cash provided by operating activities for the nine-month periods ended February 28, 2013 and February 29, 2012 was $9.8 million and $2.1 million, respectively. The increase was primarily the result of higher income from operations and changes in working capital items.

Net cash used by investing activities for the nine-month periods ended February 28, 2013 and February 29, 2012 was $71.0 million and $89.1 million, respectively.

Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $61.3 million and $64.9 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively, of which $38.5 million and $32.2 million was capitalized interest paid in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain existing operations were $17.8 million and $31.4 million in the nine-month periods ended February 28, 2013 and February 29, 2012, respectively, of which $18.0 million was incurred to acquire aggregate reserves in the nine-month period ended February 29, 2012.

Net cash provided by financing activities for the nine-month period ended February 28, 2013 was $4.9 million. Net cash used by financing activities for the nine-month period ended February 29, 2012 was $2.3 million. Debt issuance costs incurred in connection with the extension and modification of our credit facility were $1.6 million in the nine-month period ending February 29, 2012. Dividends paid on our common stock were $2.1 million for the nine-month period ended February 29, 2012. On October 12, 2011 the Company suspended payment of its quarterly cash dividend.

OTHER ITEMS

Environmental Matters

We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. See Note 9 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report for a description of certain claims. It is possible that we could be held liable for future charges which might be material but are not

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currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by us.

Market Risk

Historically, we have not entered into derivatives or other financial instruments for trading or speculative purposes. Because of the short duration of our investments, changes in market interest rates would not have a significant impact on their fair value. The fair value of fixed rate debt will vary as interest rates change.

The estimated fair value of each class of financial instrument as of February 28, 2013 and May 31, 2012 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices. As of February 28, 2013, the fair value of our long-term debt, including the current portion, was approximately $718.7 million compared to the carrying amount of $660.2 million. As of May 31, 2012, the fair value of our long-term debt, including the current portion, was approximately $646.8 million compared to the carrying amount of $658.2 million.

Our operations require large amounts of energy and are dependent upon energy sources, including electricity and fossil fuels. Prices for energy are subject to market forces largely beyond our control. We have generally not entered into any long-term contracts to satisfy our fuel and electricity needs, with the exception of coal which we purchase from specific mines pursuant to long-term contracts. However, we continually monitor these markets and we may decide in the future to enter into additional long-term contracts. If we are unable to meet our requirements for fuel and electricity, we may experience interruptions in our production. Price increases or disruption of the uninterrupted supply of these products could adversely affect our results of operations.

Critical Accounting Policies

The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The critical accounting policies that affect the more complex judgments and estimates are described in our Annual Report on Form 10-K for the year ended May 31, 2012.

Recently Issued Accounting Guidance

In June 2011, the Financial Accounting Standards Board issued new accounting guidance that requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. In December 2011, the Financial Accounting Standards Board issued an amendment to an existing accounting standard which defers the requirement to present reclassification adjustments for each component of other comprehensive income on the face of the income statement. The new guidance is effective for us on June 1, 2012 and has not had a material impact on our consolidated financial statements

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. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan,” “anticipate,” and other similar words. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on our business, the cyclical and seasonal nature of our business, the level of construction activity in our markets, abnormal periods of inclement weather, unexpected periods of equipment downtime, unexpected operational difficulties, changes in the cost of raw materials, fuel and energy, changes in cost or availability of transportation, changes in interest rates, the timing and amount of federal, state and local funding for infrastructure, delays in announced capacity expansions, ongoing volatility and uncertainty in the capital or credit markets, the impact of environmental laws, regulations and claims, changes in governmental and public policy, and the risks and uncertainties described in our reports on Forms 10-K, 10-Q and 8-K. Forward-looking statements speak only as of the date hereof, and we assume no obligation to publicly update such statements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

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The information regarding the fair value of our fixed rate debt is included under Market Risk in Part I, Item 2 of this report and incorporated herein by reference.

Item 4.    Controls and Procedures

We maintain 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, our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of February 28, 2013.

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

The information required by this item is included in Note 10 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report and incorporated herein by reference.

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

Market and Shareholders Information. Shares of our common stock, $1 par value, are traded on the New York Stock Exchange (ticker symbol TXI). The restriction on the payment of dividends is included in Note 3 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report and incorporated herein by reference. On October 12, 2011, the Company suspended payment of its quarterly cash dividend.

Sales of Unregistered Securities. On October 10, 2012, a retiring director was issued 345 shares of our common stock to settle his account for deferred director's fees. On December 28, 2012, our chairman of the board was issued 66,990 shares of our common stock in payment of deferred compensation earned while he was CEO of the Company. Such shares were issued in reliance on the exemption from registration provided in Section 4(2) of the Securities Act of 1933, as amended.

Issuer Purchases of Equity Securities. We are restricted by our loan covenants from purchasing our Common Stock on the open market. However, in connection with so-called “stock swap exercises” of employee stock options, shares are surrendered or deemed surrendered to the Company to pay the exercise price. The following table presents information with respect to such transactions which occurred during the nine-month period ended February 28, 2013.

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
June 1, 2012 – June 30, 2012	—	$	—	—	—
July 1, 2012 – July 31, 2012	—	—		—	—
August 1, 2012 – August 31, 2012	4,770	43.33		—	—
September 1, 2012 – September 30, 2012	—	—		—	—
October 1, 2012 – October 31, 2012	—	—		—	—
November 1, 2012 – November 30, 2012	—	—		—	—
December 1, 2012 – December 31, 2012	3,507	50.09		—	—
January 1, 2013 – January 31, 2013	19,504	57.13		—	—
February 1, 2013 – February 28, 2013	—	—		—	—
Total	27,781	$	55.08	—	—

Item 4.     Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in exhibit 95.1 to this report.

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Item 5.     Other Information

On January 4, 2013, we entered into the Amendment No. 3 and Restatement of SAR Agreement for Employee Directors and Assumption Under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (the “Amendment”) with Mel G. Brekhus, our President and Chief Executive Officer. The Amendment amended and restated the existing SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan (as previously amended, the “Original SAR Agreement”). The Amendment amends the Original SAR Agreement by (i) providing that payment of the net appreciation arising out of the exercise of outstanding share appreciation rights, or SARs, shall be made in shares of the Company's common stock rather than cash, such stock to be issued under the 2004 Omnibus Equity Compensation Plan, (ii) amending the expiration of the term during which SARs can be exercised from May 31, 2014 to the 30^th day after the termination of Mr. Brekhus' employment, and (iii) deleting the change of control provisions of the Original SAR Agreement.

Item 6.    Exhibits

The following exhibits are included herein:

3.1	Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010)
3.2	Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010)
3.3	Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006)
4.1	Form of the Company’s 9 1/4% Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010)
4.2	Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010)
4.3	Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010)
10.1	Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010)
10.2	Third Amended and Restated Credit Agreement, dated as of August 25, 2011, among the Company, Bank of America, N.A., as Administrative Agent, Lead Collateral Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 31, 2011)
10.3	Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010)
10.4	First Amendment to Amended and Restated Security Agreement, dated as of August 25, 2011, among the Company, the Subsidiary Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 31, 2011)
10.5	Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010)
10.6	Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994)
10.7	Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Appendix A to Proxy Statement filed on August 24, 2012
10.8	Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006)
10.9	Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009)
10.10	TXI Annual Incentive Plans-Fiscal Year 2013 (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 17, 2012)
10.11	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2013 (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K filed on July 21, 2010)
10.12	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2014 (incorporated by reference to Exhibit 10.18 to Annual Report on Form 10-K filed on July 15, 2011)
10.13	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2015 (incorporated by reference to Exhibit 10.13 to Annual Report on Form 10-K filed on July 17, 2012)

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10.14	Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006)
10.15	Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on August 12, 2005)
10.16	Texas Industries, Inc. Management Deferred Compensation Plan (incorporated by reference to Appendix B to Proxy Statement file on August 24, 2012)
10.17	Amendment No. 3 and Restatement of SAR Agreement for Employee Directors and Assumption Under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated January 4, 2013
10.18	Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 24, 2006)
10.19	Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 7, 2010)
10.20	Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended (incorporated by reference to Exhibit 10.27 to Quarterly Report Form 10-Q filed on January 7, 2010)
10.21	Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on April 25, 2006)
10.22	Form of Restricted Stock Unit Agreement Under the Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan
10.23	Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.28 to Quarterly Report on Form 10-Q filed on September 27, 2007, noting that portions of the exhibit have been omitted pursuant to a request for confidential treatment)
10.24	Contract Amendment No. 1, executed August 17, 2009, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 21, 2009)
10.25	Form of Texas Industries, Inc. Management Deferred Compensation Plan Election Agreement
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
95.1	Mine Safety Disclosure Exhibit
101	The following financial information from Texas Industries, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of February 28, 2103 and May 31, 2012, (ii) Consolidated Statements of Operations for the three months and nine months ended February 28, 2013 and February 29, 2012, (iii) Consolidated Statements of Comprehensive Loss for the three months and nine months ended February 28, 2013 and February 29, 2102, (iv) Consolidated Statements of Cash Flows for the nine months ended February 28, 2013 and February 29, 2012, and (v) the Notes to Consolidated Financial Statements.

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SIGNATURES

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

	TEXAS INDUSTRIES, INC.
March 28, 2013	/s/ Kenneth R. Allen
	Kenneth R. Allen
	Vice President – Finance and Chief Financial Officer
	(Principal Financial Officer)
March 28, 2013	/s/ T. Lesley Vines
	T. Lesley Vines
	Vice President – Corporate Controller and Treasurer
	(Principal Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number
3.1	Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010)
3.2	Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010)
3.3	Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006)
4.1	Form of the Company’s 9 1/4% Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010)
4.2	Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010)
4.3	Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010)
10.1	Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010)
10.2	Third Amended and Restated Credit Agreement, dated as of August 25, 2011, among the Company, Bank of America, N.A., as Administrative Agent, Lead Collateral Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 31, 2011)
10.3	Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010)
10.4	First Amendment to Amended and Restated Security Agreement, dated as of August 25, 2011, among the Company, the Subsidiary Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 31, 2011)
10.5	Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010)
10.6	Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994)
10.7	Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Appendix A to Proxy Statement filed on August 24, 2012
10.8	Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006)
10.9	Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009)
10.10	TXI Annual Incentive Plans-Fiscal Year 2013 (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 17, 2012)

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Exhibit Number
10.11	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2013 (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K filed on July 21, 2010)
10.12	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2014 (incorporated by reference to Exhibit 10.18 to Annual Report on Form 10-K filed on July 15, 2011)
10.13	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2015 (incorporated by reference to Exhibit 10.13 to Annual Report on Form 10-K filed on July 17, 2012)
10.14	Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006)
10.15	Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on August 12, 2005)
10.16	Texas Industries, Inc. Management Deferred Compensation Plan (incorporated by reference to Appendix B to Proxy Statement filed on August 24, 2012)
10.17	Amendment No. 3 and Restatement of SAR Agreement for Employee Directors and Assumption Under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated January 4, 2013.
10.18	Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 24, 2006)
10.19	Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 7, 2010)
10.20	Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended (incorporated by reference to Exhibit 10.27 to Quarterly Report Form 10-Q filed on January 7, 2010)
10.21	Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on April 25, 2006)
10.22	Form of Restricted Stock Unit Agreement under the Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan
10.23	Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.28 to Quarterly Report on Form 10-Q filed on September 27, 2007, noting that portions of the exhibit have been omitted pursuant to a request for confidential treatment)
10.24	Contract Amendment No. 1, executed August 17, 2009, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 21, 2009)
10.25	Form of Texas Industries, Inc. Management Deferred Compensation Plan Election Agreement
12.1	Computation of Ratios of Earnings to Fixed Charges
15.1	Letter re unaudited Interim Financial Information

Exhibit Number
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
95.1	Mine Safety Disclosure Exhibit
101	The following financial information from Texas Industries, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of February 28, 2103 and May 31, 2012, (ii) Consolidated Statements of Operations for the three months and nine months ended February 28, 2013 and February 29, 2012, (iii) Consolidated Statements of Comprehensive Loss for the three months and nine months ended February 28, 2013 and February 29, 2102, (iv) Consolidated Statements of Cash Flows for the nine months ended February 28, 2013 and February 29, 2012, and (v) the Notes to Consolidated Financial Statements.

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