Texas Industries 10-Q 2007 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended February 28, 2007

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 Incorporation or Organization)	(IRS Employer Identification No.)
1341 West Mockingbird Lane, Suite 700W, Dallas, Texas	75247-6913
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code (972) 647-6700

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

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

Large Accelerated Filer  x            Accelerated Filer  ¨            Non-Accelerated Filer  ¨

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

There were 27,308,059 shares of the Registrant’s Common Stock, $1.00 par value, outstanding as of March 26, 2007.

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INDEX

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — February 28, 2007 and May 31, 2006	3
	Consolidated Statements of Operations — three months and nine months ended February 28, 2007 and February 28, 2006	4
	Consolidated Statements of Cash Flows — nine months ended February 28, 2007 and February 28, 2006	5
	Notes to Consolidated Financial Statements	6
	Report of Independent Registered Public Accounting Firm	27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk — the information required by this item is included in Item 2	—
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	34
SIGNATURES

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CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

In thousands	Unaudited February 28, 2007			May 31, 2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	20,365		$	84,139
Short-term investments		—			50,606
Receivables – net		126,527			132,849
Inventories		114,751			102,052
Deferred income taxes and prepaid expenses		18,779			33,599
TOTAL CURRENT ASSETS		280,422			403,245
OTHER ASSETS
Goodwill		58,395			58,395
Real estate and investments		132,884			125,913
Deferred charges and intangibles		16,097			22,706
		207,376			207,014
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements		132,081			128,056
Buildings		41,767			42,069
Machinery and equipment		712,048			688,255
Construction in progress		298,682			95,094
		1,184,578			953,474
Less depreciation and depletion		511,406			483,163
		673,172			470,311
	$	1,160,970		$	1,080,570
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	74,810		$	63,581
Accrued interest, wages and other items		45,354			55,059
Current portion of long-term debt		1,475			681
TOTAL CURRENT LIABILITIES		121,639			119,321
LONG-TERM DEBT		250,358			251,505
CONVERTIBLE SUBORDINATED DEBENTURES		92,370			159,725
DEFERRED INCOME TAXES AND OTHER CREDITS		87,987			76,955
SHAREHOLDERS’ EQUITY
Common stock, $1 par value		27,157			25,863
Additional paid-in capital		401,139			334,054
Retained earnings		229,559			169,696
Cost of common stock in treasury		(44,783	)		(52,093	)
Pension liability adjustment		(4,456	)		(4,456	)
		608,616			473,064
	$	1,160,970		$	1,080,570

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended February 28,						Nine months ended February 28,
In thousands except per share	2007			2006			2007			2006
NET SALES	$	216,771		$	216,763		$	734,255		$	679,411
Cost of products sold		169,702			179,397			569,097			571,553
GROSS PROFIT		47,069			37,366			165,158			107,858
Selling, general and administrative		27,476			20,487			78,681			58,547
Interest		3,289			7,340			13,474			24,455
Loss on debt retirements and spin-off charges		26			—			26			112,391
Other income		(3,273	)		(5,274	)		(31,624	)		(17,576	)
		27,518			22,553			60,557			177,817
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		19,551			14,813			104,601			(69,959	)
Income taxes (benefit)		6,838			3,502			33,805			(27,440	)
INCOME (LOSS) FROM CONTINUING OPERATIONS		12,713			11,311			70,796			(42,519	)
Income from discontinued operations – net of income taxes		—			—			—			8,691
NET INCOME (LOSS)	$	12,713		$	11,311		$	70,796		$	(33,828	)
Basic earnings (loss) per share
Income (loss) from continuing operations	$	.52		$	.49		$	2.93		$	(1.85	)
Income from discontinued operations		—			—			—			.38
Net income (loss)	$	.52		$	.49		$	2.93		$	(1.47	)
Diluted earnings (loss) per share
Income (loss) from continuing operations	$	.50		$	.47		$	2.71		$	(1.85	)
Income from discontinued operations		—			—			—			.38
Net income (loss)	$	.50		$	.47		$	2.71		$	(1.47	)
Average shares outstanding
Basic		24,438			23,117			24,133			22,986
Diluted		27,771			27,628			27,629			22,986
Cash dividends per share	$	.075		$	.075		$	.225		$	.225

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Nine months ended February 28,
In thousands	2007			2006
OPERATING ACTIVITIES
Net income (loss)	$	70,796		$	(33,828	)
Adjustments to reconcile net income (loss) to cash provided by continuing operating activities
Income from discontinued operations		—			(8,691	)
Loss on debt retirements		26			107,006
Gain on asset disposals		(570	)		(9,277	)
Depreciation, depletion and amortization		33,856			33,373
Deferred income taxes (benefit)		16,830			(26,632	)
Stock-based compensation expense		10,268			6,484
Excess tax benefits from stock-based compensation		(1,647	)		—
Other – net		1,533			(1,277	)
Changes in operating assets and liabilities
Receivables – net		4,540			7,239
Inventories		(12,259	)		(20,262	)
Prepaid expenses		3,910			377
Accounts payable and accrued liabilities		(1,532	)		(512	)
Cash provided by continuing operating activities		125,751			54,000
Cash used by discontinued operating activities		—			(7,704	)
Net cash provided by operating activities		125,751			46,296
INVESTING ACTIVITIES
Capital expenditures – expansions		(170,217	)		(36,061	)
Capital expenditures – other		(66,222	)		(27,512	)
Proceeds from asset disposals		961			14,509
Purchases of short-term investments		(8,500	)		(48,500	)
Sales of short-term investments		59,000			—
Investments in life insurance contracts		(5,288	)		(4,071	)
Other – net		(125	)		(2,015	)
Cash used by continuing investing activities		(190,391	)		(103,650	)
Cash used by discontinued investing activities		—			(2,757	)
Net cash used by investing activities		(190,391	)		(106,407	)
FINANCING ACTIVITIES
Long-term borrowings		—			250,000
Debt retirements		(1,285	)		(600,353	)
Debt issuance costs		—			(7,356	)
Debt retirement costs		(4	)		(96,029	)
Stock option exercises		5,976			7,028
Excess tax benefits from stock-based compensation		1,647			—
Common dividends paid		(5,468	)		(5,172	)
Cash provided (used) by continuing financing activities		866			(451,882	)
Cash provided by discontinued financing activities		—			340,587
Net cash provided (used) by financing activities		866			(111,295	)
Decrease in cash and cash equivalents		(63,774	)		(171,406	)
Cash and cash equivalents at beginning of period		84,139			251,600
Cash and cash equivalents at end of period	$	20,365		$	80,194

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Texas Industries, Inc. and subsidiaries is a leading supplier of heavy building materials in the United States through three business segments: cement, aggregates and consumer products, which produce and sell cement; stone, sand and gravel and expanded shale and clay aggregate; and ready-mix concrete and packaged concrete and related products, respectively, from facilities concentrated primarily in Texas, Louisiana and California.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and 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, 2007, are not necessarily indicative of the results that may be expected for the year ended May 31, 2007. 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, 2006. When used in these notes the terms “Company,” “we,” “us” or “our” mean Texas Industries, Inc. and subsidiaries unless the context indicates otherwise.

Principles of Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and all subsidiaries except a subsidiary trust in which we have a variable interest but are not the primary beneficiary. Discontinued operations relate to our former steel segment which we spun-off in the form of a pro-rata, tax-free dividend to our shareholders on July 29, 2005. Unless otherwise indicated, all amounts in the accompanying notes relate to our continuing operations. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

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

Cash and Cash Equivalents. Investments with maturities of less than 90 days when purchased are classified as cash equivalents and consist primarily of money market funds and investment grade commercial paper issued by major corporations and financial institutions.

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

Receivables.Management evaluates the ability to collect accounts receivable based on a combination of factors. A reserve for doubtful accounts is maintained based on the length of time receivables are past due or the status of a customer’s financial condition. If 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 a reasonably 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 a reasonably estimable liability has been incurred.

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

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

Goodwill. Management tests goodwill for impairment at least annually by reporting unit. If the carrying amount of the goodwill exceeds its fair value, an impairment loss is recognized. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors. Goodwill having a carrying value of $58.4 million at February 28, 2007 and May 31, 2006 resulted from the acquisition of Riverside Cement Company and is identified with our California cement operations. The fair value of the reporting unit exceeds its carrying value.

Real Estate and Investments.Surplus real estate and real estate acquired for development of high quality industrial, office or multi-use parks totaled $6.5 million at February 28, 2007 and $7.3 million at May 31, 2006.

Investments are composed primarily of life insurance contracts purchased in connection with certain of our benefit plans. The contracts, recorded at their net cash surrender value, totaled $104.2 million (net of distributions of $1.3 million) at February 28, 2007 and $96.3 million (net of distributions of $1.3 million) at May 31, 2006.

Investments also include $22.0 million at February 28, 2007 and May 31, 2006, representing the long-term portion of a note received in connection with the sale of land associated with our expanded shale and clay operations in south Texas. On November 30, 2006, the maturity date of the note was extended to May 31, 2008.

Deferred Charges and Intangibles.Deferred charges are composed primarily of debt issuance costs that totaled $7.8 million at February 28, 2007 and $10.3 million at May 31, 2006. The costs are amortized over the term of the related debt.

Intangibles are composed of non-compete agreements and other intangibles with finite lives being amortized on a straight-line basis over periods of 7 to 15 years. Their carrying value, adjusted for write-offs, totaled $1.2 million (net of accumulated amortization of $3.2 million) at February 28, 2007 and $1.4 million (net of accumulated amortization of $3.0 million) at May 31, 2006. Amortization expense incurred was $200,000 in the nine-month period ended February 28, 2007 and $300,000 in the nine-month period ended February 28, 2006. Estimated amortization expense for the five succeeding years is approximately $300,000 for 2008 through 2010, $200,000 for 2011 and $100,000 for 2012.

Other Credits.Other credits totaled $62.6 million at February 28, 2007 and $55.3 million at May 31, 2006, and are composed primarily of liabilities related to our retirement plans, deferred compensation agreements and asset retirement obligations.

Asset Retirement Obligations.Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” which applies to legal obligations associated with the retirement of long-lived assets, requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through a charge to operating expense. 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,
In thousands	2007			2006
Balance at beginning of period	$	4,346		$	4,655
Additions		811			5
Accretion expense		282			246
Settlements		(550	)		(585	)
Balance at end of period	$	4,889		$	4,321

Pension Liability Adjustment.The pension liability adjustment to shareholders’ equity totaled $4.5 million (net of tax of $2.5 million) at February 28, 2007 and May 31, 2006. The adjustment relates to a defined benefit retirement plan covering approximately 600 employees and retirees of our California cement subsidiary. Comprehensive income or loss consists of net income or loss and the pension liability adjustment to shareholders’ equity. Comprehensive income (loss) was the same as net income (loss) for the three-month and nine-month periods ended February 28, 2007 and 2006.

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 including these delivery fees.

Other Income.The governments of the U.S. and Mexico entered into the U.S.-Mexico Agreement on Cement, which settled the 16-year dispute over the U.S. antidumping duty order on imports from Mexico. Pursuant to that agreement and a related agreement among the importers of cement from Mexico and certain producers in the U.S., including us, 50% of the cash deposits of estimated antidumping duties collected from importers of Mexican cement were distributed to the U.S. producers. Other income in the nine-month period ended February 28, 2007 includes $19.8 million, which represents substantially all of the distributions to which we are entitled pursuant to these agreements.

Other income in the nine-month period ended February 2006 includes a gain of $3.8 million resulting from the sale of certain investment assets.

Routine sales of surplus operating assets and real estate resulted in gains of $300,000 and $3.0 million in the three-month periods ended February 28, 2007 and 2006, respectively, and $2.9 million and $7.6 million in the nine-month periods ended February 28, 2007 and 2006, respectively. Interest income totaled $1.2 million and $1.6 million in the three-month periods ended February 28, 2007 and 2006, respectively, and $5.2 million and $4.5 million in the nine-month periods ended February 28, 2007 and 2006, respectively.

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

Earnings Per Share(“EPS”). Basic EPS is computed by adjusting net income for the participation in earnings of unvested restricted shares outstanding, then dividing by the weighted-average number of common shares outstanding during the period including contingently issuable shares and excluding outstanding unvested restricted shares.

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

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

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Basic and Diluted EPS are calculated as follows:

	Three-months ended February 28,					Nine-months ended February 28,
In thousands except per share	2007			2006		2007			2006
Basic earnings (loss)
Income (loss) from continuing operations	$	12,713		$	11,311	$	70,796		$	(42,519	)
Income from discontinued operations		—			—		—			8,691
Unvested restricted share participation		(5	)		—		(24	)		—
Basic income (loss)	$	12,708		$	11,311	$	70,772		$	(33,828	)
Diluted earnings (loss)
Income (loss) from continuing operations	$	12,713		$	11,311	$	70,796		$	(42,519	)
Interest on convertible subordinated debentures – net of tax		1,284			1,787		4,138			—
Unvested restricted share participation		(5	)		—		(24	)		—
Diluted income (loss) from continuing operations		13,992			13,098		74,910			(42,519	)
Income from discontinued operations		—			—		—			8,691
Diluted income (loss)	$	13,992		$	13,098	$	74,910		$	(33,828	)
Shares
Weighted-average shares outstanding		24,441			23,089		24,135			22,957
Contingently issuable shares		7			28		7			29
Unvested restricted shares		(10	)		—		(9	)		—
Basic weighted-average shares		24,438			23,117		24,133			22,986
Convertible subordinated debentures		2,785			3,897		3,003			—
Stock option, restricted share and award dilution		548			614		493			—
Diluted weighted-average shares*		27,771			27,628		27,629			22,986
Basic earnings (loss) per share
Income (loss) from continuing operations	$	.52		$	.49	$	2.93		$	(1.85	)
Income from discontinued operations		—			—		—			.38
Net income (loss)	$	.52		$	.49	$	2.93		$	(1.47	)
Diluted earnings (loss) per share
Income (loss) from continuing operations	$	.50		$	.47	$	2.71		$	(1.85	)
Income from discontinued operations		—			—		—			.38
Net income (loss)	$	.50		$	.47	$	2.71		$	(1.47	)
* Shares excluded due to antidilutive effect
Convertible subordinated debentures		—			—		—			3,897
Stock options, restricted shares and awards		—			—		73			731

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Stock-based Compensation.Effective June 1, 2006, we adopted SFAS No. 123R, “Share-Based Payment,” utilizing the modified prospective transition method. Under this transition method, we account for awards granted prior to adoption, but for which the vesting period is not complete, on a prospective basis with expense being recognized in our statement of operations based on the grant date fair value estimated in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation.” We use the Black-Scholes option-pricing model to determine the fair value of stock options granted as of the date of grant. We use the average stock price on the date of grant to determine the fair value of restricted stock awards granted. The impact of recognizing compensation expense related to stock options using the fair value recognition provisions of SFAS No. 123R for the three-month period ended February 28, 2007 was $700,000 (net of tax benefit of $200,000) or $.03 per basic share and $.03 per diluted share, and for the nine-month period ended February 28, 2007 was $2.0 million (net of tax benefit of $400,000) or $.08 per basic share and $.07 per diluted share. The results for periods prior to June 1, 2006 have not been restated.

SFAS No. 123R also requires that the benefits associated with tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as previously required. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts can not be estimated, because they depend on, among other things, when employees exercise stock options. For the nine-month period ended February 28, 2007 excess tax benefits recognized in financing cash flows were $1.6 million.

Prior to June 1, 2006, we accounted for employee stock options using the intrinsic value method prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees” as allowed by SFAS No. 123. Generally, no expense was recognized related to our stock options under this method because the exercise price of each option was set at the fair market value of the underlying common stock on the date the option was granted.

In accordance with SFAS No. 123, we disclosed the compensation cost related to our stock options based on the estimated fair value at the date of grant. All options were granted with graded vesting 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 with forfeitures recognized as they occurred. The fair value of each option grant was estimated on the date of grant for purposes of the pro forma disclosures using the Black-Scholes option-pricing model. During the nine-month period ended February 28, 2006, the weighted-average fair value of options granted was $20.46 based on weighted average assumptions for dividend yield of .58%, volatility factor of .338, risk-free interest rate of 4.31% and expected life in years of 6.4.

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

If we had applied the fair value recognition provision of SFAS No. 123, our net income (loss) and earnings (loss) per share would have been adjusted to the following pro forma amounts for the three-month and nine-month periods ended February 28, 2006.

	Three-months ended February 28,			Nine-months ended February 28,
In thousands except per share	2006			2006
Net income (loss)
As reported	$	11,311		$	(33,828	)
Plus: stock-based compensation included in the determination of net income (loss) as reported, net of tax		1,748			4,215
Less: fair value of stock-based compensation, net of tax		(2,424	)		(4,454	)
Pro forma	$	10,635		$	(34,067	)
Basic earnings (loss) per share
As reported	$	.49		$	(1.47	)
Pro forma		.46			(1.48	)
Diluted earnings (loss) per share
As reported	$	.47		$	(1.47	)
Pro forma		.45			(1.48	)

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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. 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 date of grant and expire ten years later. 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. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. During the nine-month period ended February 28, 2007, the weighted-average fair value of options granted was $27.61 based on weighted average assumptions for dividend yield of .43%, volatility factor of .330, risk-free interest rate of 4.78% and expected life in years of 6.0. Expected dividend yields are based on the approved annual dividend rate in effect and the market price of our common stock at the time of grant. Expected volatility is based on an analysis of historical volatility of our common stock. Risk-free interest rates are determined using the implied yield currently available for U.S. treasury bonds and notes with a remaining term equal to the expected life of the options. Expected life of the options is determined based on the historical share option exercise experience of our optionees.

A summary of option transactions for the nine-month period ended February 28, 2007, follows:

	Shares Under Option		Weighted-Average Option Price
Outstanding at May 31, 2006	1,583,093		$	29.48
Granted	203,350			70.18
Exercised	(280,549	)		22.94
Canceled	(6,201	)		39.01
Outstanding at February 28, 2007	1,499,693		$	36.19
Exercisable at February 28, 2007	769,197		$	28.12

The following table summarizes information about stock options outstanding as of February 28, 2007.

	Range of Exercise Prices
	$16.04 - $27.85		$31.15 - $38.34		$45.86 - $70.18
Options outstanding
Shares outstanding		663,420		255,097		581,176
Weighted-average remaining life in years		5.26		2.26		8.94
Weighted-average exercise price	$	19.24	$	33.98	$	56.51
Options exercisable
Shares exercisable		433,198		243,098		92,901
Weighted-average exercise price	$	20.63	$	33.80	$	48.14

Outstanding options expire on various dates to January 17, 2017. We have reserved 1,845,578 shares for future awards under the 2004 Plan.

As of February 28, 2007, the aggregate intrinsic value (the difference in the closing market price of our common stock of $79.21 and the exercise price to be paid by the optionee) of stock options outstanding was $64.5 million. The aggregate intrinsic value of exercisable stock options at that date was $39.3 million. During the three-month and nine-month periods ended February 28, 2007, the total intrinsic value of 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 $9.0 million and $11.8 million, respectively.

As of February 28, 2007, outstanding stock appreciation rights totaled 158,645 shares, deferred compensation agreements payable in cash totaled 98,337 shares, deferred compensation agreements payable in common stock totaled 5,707 shares and stock awards totaled 9,514 shares.

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As of February 28, 2007, $13.9 million of total unrecognized compensation cost related to stock options, stock appreciation rights contracts, restricted stock grants and stock awards is expected to be recognized. We currently expect to recognize approximately $5.6 million of this stock-based compensation expense in 2008, $3.3 million in 2009, $2.5 million in 2010, $1.6 million in 2011, $800,000 in 2012 and an aggregate of $100,000 thereafter.

Total charges for stock-based compensation were $4.0 million and $2.7 million in the three-month periods ended February 28, 2007 and 2006, respectively, and $10.3 million and $6.5 million in the nine-month periods ended February 28, 2007 and 2006, respectively.

Inventory Costs.On June 1, 2006, we adopted SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” This standard clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be expensed as incurred and not included in overhead. In addition, this standard requires that the allocation of fixed production overhead costs to inventory be based on the normal capacity of the production facilities. The adoption of this standard did not have an effect on our consolidated financial position or results of operations.

Accounting for Mining Stripping Costs.On June 1, 2006, we adopted, Emerging Issues Task Force Issue 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry,” which requires that stripping costs incurred during the production phase of the mine be included in the costs of the inventory produced during the period that the stripping costs are incurred. As of May 31, 2006, the balance of our capitalized post-production stripping costs was $7.9 million. In accordance with the transition provision of EITF 04-6, we wrote off these deferred costs, effective June 1, 2006, and recorded a charge to retained earnings of $4.9 million, net of tax benefits of $3.0 million. We will now recognize the costs of all post-production stripping activity as a cost of the inventory produced during the period the stripping costs are incurred. Although dependent in part on the future level of post-production stripping activity which varies from period to period, we do not expect that EITF 04-6 will have a material impact on our financial position or results of operations for periods following adoption.

Accounting for Income Taxes.In July 2006, the Financial Accounting Standards Board issued FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes,” which will be effective for our Company beginning June 1, 2007. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes” and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We are currently evaluating the impact this interpretation will have on our consolidated financial statements.

Fair Value Measurements.In September 2006, the Financial Accounting Standards Board issued SFAS No. 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS is effective for our Company beginning June 1, 2008. We believe that the adoption of SFAS No. 157 will not have a material impact on our consolidated financial statements.

Accounting for Defined Benefit Pension and Other Postretirement Plans.In September 2006, the Financial Accounting Standards Board issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This standard requires that previously unrecognized actuarial gains or losses, prior service costs or credits and transition obligations or assets be recognized generally through adjustments to accumulated other comprehensive income and credits to prepaid benefit cost or accrued benefit liability. As a result of these adjustments, the current funded status of defined benefit pension plans and other postretirement benefit plans will be reflected in our consolidated balance sheet as of May 31, 2007.

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WORKING CAPITAL

Working capital totaled $158.8 million at February 28, 2007, compared to $283.9 million at May 31, 2006.

Receivables consist of:

In thousands	February 28, 2007		May 31, 2006
Accounts receivable	$	116,409	$	122,131
Notes receivable		641		1,170
Interest receivables		1,186		4
Income tax refund claims		8,291		9,544
	$	126,527	$	132,849

Accounts receivable are presented net of allowances for doubtful receivables of $1.7 million at February 28, 2007 and $1.6 million at May 31, 2006. Provisions for bad debts charged to expense were $400,000 and $500,000 in the nine-month periods ended February 28, 2007 and 2006, respectively. Uncollectible accounts written off amounted to $300,000 and $400,000 in the nine-month periods ended February 28, 2007 and 2006, respectively. The notes receivable included in current receivables relate to routine sales of surplus operating assets and real estate.

Inventories consist of:

In thousands	February 28, 2007		May 31, 2006
Finished products	$	9,931	$	10,341
Work in process		51,873		42,384
Raw materials		16,345		13,881
Total inventories at LIFO cost		78,149		66,606
Parts and supplies		36,602		35,446
Total inventories	$	114,751	$	102,052

Inventories are stated at cost (not in excess of market) with finished products, work in process and raw material inventories using the last-in, first-out (“LIFO”) method and parts and supplies inventories 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 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 $27.5 million at February 28, 2007 and $26.8 million at May 31, 2006.

Accrued interest, wages and other items consist of:

In thousands	February 28, 2007		May 31, 2006
Interest	$	3,359	$	8,531
Employee compensation		31,508		33,422
Income taxes		—		2,113
Property taxes and other		10,487		10,993
	$	45,354	$	55,059

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LONG-TERM DEBT

Long-term debt consists of:

In thousands	February 28, 2007		May 31, 2006
Senior secured revolving credit facility expiring in 2010	$	—	$	—
Senior notes due 2013, interest rate 7.25%		250,000		250,000
Pollution control bonds due through 2007, interest rate 6.19% (75% of prime)		1,475		1,815
Other		358		371
		251,833		252,186
Less current maturities		1,475		681
	$	250,358	$	251,505

7.25% Senior Notes.At any time on or prior to July 15, 2009, 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 July 15, 2009, we may redeem the notes at a premium of 103.625% in 2009, 101.813% in 2010 and 100% in 2011 and thereafter. In addition, prior to July 15, 2008, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 107.25% of the principal amount thereof, plus accrued interest 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 7.25% Senior Notes. The indenture governing the notes contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem our stock, make investments, sell assets, incur liens, enter into agreements restricting our subsidiaries’ ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of our assets.

Senior Secured Revolving Credit Facility.The senior secured revolving credit facility expires in July 2010 and provides up to $200 million of available borrowings. It includes a $50 million sub-limit for letters of credit. Any outstanding letters of credit are deducted from the borrowing availability under the facility. At February 28, 2007, $29.5 million of the facility was utilized to support letters of credit. Amounts drawn under the facility bear interest either at the LIBOR rate plus a margin of 1% to 2%, or at a base rate (which is the higher of the federal funds rate plus 0.5% and the prime rate) plus a margin of up to 1%. The interest rate margins are subject to adjustments based on our leverage ratio. Commitment fees are payable currently at an annual rate of 0.25% on the unused portion of the facility. We may terminate the facility at any time.

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 accounts, inventory, equipment, intellectual property and other personal property, and in all of our equity interest in present and future domestic subsidiaries and 66% of the equity interest in any future foreign subsidiaries.

The credit facility contains covenants restricting, among other things, prepayment or redemption of our senior notes, distributions, dividends and repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. We are required to comply with certain financial tests and to maintain certain financial ratios, such as leverage and interest coverage ratios. At February 28, 2007, we were in compliance with all of our loan covenants.

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

Other.Maturities of long-term debt for each of the five succeeding years are $1.5 million for 2008 and none for 2009 through 2012. The total amount of interest paid was $25.4 million and $52.7 million during the nine-month periods ended February 28, 2007 and 2006, respectively. Interest capitalized was $8.1 million and $500,000 during the nine-month periods ended February 28, 2007 and 2006, respectively.

CONVERTIBLE SUBORDINATED DEBENTURES

On June 5, 1998, we issued $206.2 million aggregate principal amount of 5.5% convertible subordinated debentures due June 30, 2028 (the “Debentures”). TXI Capital Trust I (the “Trust”), a Delaware business trust 100% owned by us, issued 4,000,000 of its 5.5% Shared Preference Redeemable Securities (“Preferred Securities”) to the public for gross proceeds of $200 million. The combined proceeds from the issuance of the Preferred Securities and the issuance to us of the common securities of the Trust were invested by the Trust in the Debentures which are the sole assets of the Trust. Each Preferred Security is convertible at any time prior to its redemption date at the option of the holder into shares of our common stock at a conversion rate of .97468 shares of our common stock for each Preferred Security. Upon redemption or conversion of the Preferred Securities a like aggregate principal amount of Debentures is redeemed or converted.

On January 23, 2007, the Trust made a partial call for redemption of the Preferred Securities. During the three-month period ended February 28, 2007, Preferred Securities having a liquidation amount of $66.4 million were converted into 1,293,379 shares of our common stock. The conversions increased common stock and paid-in capital by a total of $65.2 million. Preferred Securities were redeemed on February 22, 2007 for the liquidation amount of $900,000 plus accrued distributions. In conjunction with the conversions and redemption, Debentures in an aggregate principal amount of $67.3 million were redeemed or converted, leaving an aggregate principal amount of $92.4 million outstanding at February 28, 2007.

On February 23, 2007, the Trust called all remaining Preferred Securities for redemption on March 26, 2007. In March 2007, prior to the redemption date, Preferred Securities having a liquidation amount of $91.5 million were converted into 1,783,466 shares of our common stock. The conversions increased common stock and additional paid-in capital by a total of $45.6 million and reduced the cost of common stock in treasury by a total of $44.8 million. The remaining Preferred Securities were redeemed on March 26, 2007 for the liquidation amount of $900,000 plus accrued distributions. In conjunction with the conversions and redemption, all outstanding Debentures were redeemed or converted.

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SHAREHOLDERS’ EQUITY

Common stock consists of:

In thousands	February 28, 2007	May 31, 2006
Shares authorized	40,000	40,000
Shares outstanding	25,523	23,945
Shares held in treasury	1,634	1,918
Shares reserved for stock options and other	3,360	3,652

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 Cumulative Preferred Stock or Series B Junior Participating Preferred Stock were outstanding as of February 28, 2007. Pursuant to a Rights Agreement, in November 2006, we distributed a dividend of one preferred share purchase right for each outstanding share of our Common Stock. Each right entitles the holder to purchase from us one one-thousandth of a share of the Series B Junior Participating Preferred Stock at a price of $300, subject to adjustment. The rights will expire on November 1, 2016 unless the date is extended or the rights are earlier redeemed or exchanged by us pursuant to the Rights Agreement.

LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES

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

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

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

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

INCOME TAXES

Federal income taxes for the interim periods ended February 28, 2007 and 2006, have been included in the accompanying financial statements on the basis of an estimated annual rate for continuing operations. The estimated annualized rate for continuing operations does not include the tax impact of the loss on debt retirements, Chaparral spin-off charges and other discrete items. The estimated annualized rate for continuing operations excluding these charges is 32.1% for 2007 compared to 27.1% for 2006. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income taxes. The estimated effective rate for discontinued operations was 35% for 2006, and reflects Chaparral’s allocable share of such tax as prescribed in the tax sharing agreement between us and Chaparral. We made income tax payments of $25.8 million and $4.3 million during the nine-month periods ended February 28, 2007 and 2006, respectively, and received income tax refunds of $600,000 during the nine-month period ended February 28, 2007.

RETIREMENT PLANS

Riverside Defined Benefit Plans.Approximately 600 employees and retirees of our California cement 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, 2007 and 2006, was as follows:

	Pension Benefit						Health Benefit
In thousands	2007			2006			2007			2006
Three-months ended February 28
Service cost	$	124		$	143		$	25		$	27
Interest cost		681			624			92			87
Expected return on plan assets		(760	)		(691	)		—			—
Amortization of prior service cost		—			—			(212	)		(212	)
Amortization of net actuarial loss		106			264			151			185
	$	151		$	340		$	56		$	87
Nine-months ended February 28
Service cost	$	370		$	429		$	74		$	80
Interest cost		2,043			1,872			276			260
Expected return on plan assets		(2,280	)		(2,073	)		—			—
Amortization of prior service cost		—			—			(634	)		(634	)
Amortization of net actuarial loss		319			791			450			554
	$	452		$	1,019		$	166		$	260

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Financial Security Defined Benefit Plans.We have a series of financial security plans (“FSP”) that are non-qualified defined benefit plans providing retirement and death benefits to substantially all of our executive and key managerial employees. The plans are contributory but not funded.

The amount of FSP benefit expense charged to costs and expenses for the three-month and nine-month periods ended February 28, 2007 and 2006, was as follows:

	FSP Benefit
In thousands	2007			2006
Three-months ended February 28
Service cost	$	571		$	487
Interest cost		440			418
Recognized actuarial loss		—			—
Participant contributions		(84	)		(79	)
	$	927		$	826
Nine-months ended February 28
Service cost	$	1,714		$	1,462
Interest cost		1,321			1,254
Recognized actuarial loss		254			—
Participant contributions		(245	)		(231	)
	$	3,044		$	2,485

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, as well as expanded shale and clay aggregates. Through the consumer products segment we produce and sell ready-mix concrete as our principal product, as well as packaged concrete and related products. We account for intersegment sales at market prices. Segment operating profit consists of net sales less operating costs and expenses, including certain operating overhead and other income items not allocated to a specific segment. Corporate includes those administrative, financial, legal, environmental, human resources 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, short-term investments, real estate and other financial assets not identified with a business segment.

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

In thousands	February 28, 2007		May 31, 2006
Identifiable assets
Cement	$	688,764	$	511,944
Aggregates		193,911		166,944
Consumer Products		84,182		90,635
Corporate		194,113		311,047
Total assets	$	1,160,970	$	1,080,570

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The following is a summary of operating results and certain other financial data for our business segments.

	Three-months ended February 28,						Nine-months ended February 28,
In thousands	2007			2006			2007			2006
Net sales
Cement
Sales to external customers	$	95,994		$	91,736		$	314,501		$	284,580
Intersegment sales		15,891			17,408			57,844			52,294
Aggregates
Sales to external customers		53,341			53,746			177,656			160,387
Intersegment sales		7,232			7,543			24,691			23,312
Consumer products
Sales to external customers		67,436			71,281			242,098			234,444
Intersegment sales		767			4,214			2,879			11,989
Eliminations		(23,890	)		(29,165	)		(85,414	)		(87,595	)
Total net sales	$	216,771		$	216,763		$	734,255		$	679,411
Segment operating profit (loss)
Cement	$	36,470		$	25,802		$	126,950		$	64,842
Aggregates		1,320			6,023			20,734			17,182
Consumer products		(1,742	)		(238	)		4,522			5,357
Unallocated overhead and other income - net		(3,257	)		(2,582	)		(8,045	)		(7,172	)
Total segment operating profit		32,791			29,005			144,161			80,209
Corporate
Selling, general and administrative expense		(11,359	)		(8,782	)		(33,628	)		(23,762	)
Interest		(3,289	)		(7,340	)		(13,474	)		(24,455	)
Loss on debt retirements and spin-off charges		(26	)		—			(26	)		(112,391	)
Other income		1,434			1,930			7,568			10,440
Income (loss) from continuing operations before income taxes	$	19,551		$	14,813		$	104,601		$	(69,959	)
Depreciation, depletion and amortization
Cement	$	5,893		$	5,808		$	17,279		$	17,692
Aggregates		3,942			3,397			11,467			10,064
Consumer products		1,607			1,530			4,749			4,609
Corporate		130			319			361			1,008
Total depreciation, depletion and amortization	$	11,572		$	11,054		$	33,856		$	33,373
Capital expenditures
Cement	$	70,224		$	28,377		$	186,613		$	47,538
Aggregates		16,601			2,605			40,689			9,003
Consumer products		1,686			2,517			7,431			6,563
Corporate		472			171			1,706			469
Total capital expenditures	$	88,983		$	33,670		$	236,439		$	63,573
Net sales by product
Cement	$	91,252		$	86,880		$	297,984		$	267,512
Stone, sand and gravel		26,749			25,132			92,506			82,577
Ready-mix concrete		56,946			59,676			202,301			195,806
Other products		24,404			27,116			82,763			75,790
Delivery fees		17,420			17,959			58,701			57,726
Total net sales	$	216,771		$	216,763		$	734,255		$	679,411

All sales were made in the United States during the periods presented with no single customer representing more than 10 percent of sales.

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Cement segment operating profit for the nine-month period ended February 28, 2007 includes $19.8 million representing distributions which we received pursuant to agreements that settled a 16-year dispute over the U.S. antidumping duty order on cement imports from Mexico.

Cement capital expenditures includes $64.0 million and $24.1 million in the three-month periods ended February 28, 2007 and 2006, respectively, and $170.2 million and $36.1 million in the nine-month periods ended February 28, 2007 and 2006, respectively, incurred in connection with the expansion and modernization of our Oro Grande, California cement plant. Other capital expenditures incurred represent normal replacement and technological upgrades of existing equipment and acquisitions to sustain existing operations in each segment.

DISCONTINUED OPERATIONS

On July 29, 2005, we completed the spin-off of our steel segment in the form of a pro rata, tax-free dividend to our shareholders of one share of Chaparral Steel Company (“Chaparral”) common stock for each share of our common stock that was owned on July 20, 2005. Following the spin-off, Chaparral became an independent, public company. We have no further ownership interest in Chaparral or in any steel business, and Chaparral has no ownership interest in us. In addition, Chaparral is not a guarantor of any of our indebtedness nor are we a guarantor of any Chaparral indebtedness. The Company’s relationship with Chaparral is now governed by a separation and distribution agreement and the ancillary agreements described in that agreement. The terms of the agreements are more fully described in our note entitled “Legal Proceedings and Contingent Liabilities”. In accordance with the terms of these agreements, we recorded a charge to retained earnings of approximately $600,000 during the nine-month period ended February 28, 2007.

We recorded a charge of approximately $107.0 million related to the early retirement of the 10.25% Senior Notes and old credit facility and incurred $5.4 million in spin-off related charges during the nine-month period ended February 28, 2006.

Operations for the nine-month period ended February 28, 2006 included discontinued operations through July 29, 2005, as summarized below:

	Nine-months ended February 28,
In thousands	2006
Net sales	$	198,893
Income before income/taxes		13,384
Income taxes		4,693
Income from discontinued operations		8,691

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CONDENSED CONSOLIDATING FINANCIAL INFORMATION

On July 6, 2005, Texas Industries, Inc. (the parent company) issued $250 million principal amount of its 7.25% Senior Notes. All existing consolidated subsidiaries of the parent company are 100% owned and, excluding Chaparral and its subsidiaries, provide a joint and several, full and unconditional guarantee of the securities. There are no significant restrictions on the parent company’s ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on a guarantor subsidiary’s ability to obtain funds from the parent company or its direct or indirect subsidiaries.

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

In thousands	Texas Industries, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Condensed consolidating balance sheet at February 28, 2007
Cash and cash equivalents	$	15,818	$	4,547	$	—	$	—		$	20,365
Short-term investments		—		—		—		—			—
Receivables – net		8,291		118,236		—		—			126,527
Intercompany receivables		17,149		18,794		—		(35,943	)		—
Inventories		—		114,751		—		—			114,751
Deferred income taxes and prepaid expenses		15,068		3,711		—		—			18,779
Total current assets		56,326		260,039		—		(35,943	)		280,422
Goodwill		—		58,395		—		—			58,395
Real estate and investments		104,184		28,700		—		—			132,884
Deferred charges and intangibles		9,628		6,469		—		—			16,097
Investment in subsidiaries		782,796		—		—		(782,796	)		—
Long-term intercompany receivables		50,000		—		—		(50,000	)		—
Property, plant and equipment – net		—		667,681		—		5,491			673,172
Total assets	$	1,002,934	$	1,021,284	$	—	$	(863,248	)	$	1,160,970
Accounts payable	$	84	$	74,726	$	—	$	—		$	74,810
Intercompany payables		18,794		17,149		—		(35,943	)		—
Accrued interest, wages and other items		7,121		38,233		—		—			45,354
Current portion of long-term debt		1,475		—		—		—			1,475
Total current liabilities		27,474		130,108		—		(35,943	)		121,639
Long-term debt		250,358		—		—		—			250,358
Convertible subordinated debentures		92,370		—		—		—			92,370
Long-term intercompany payables		—		50,000		—		(50,000	)		—
Deferred income taxes and other credits		24,116		63,871		—		—			87,987
Shareholders’ equity		608,616		777,305		—		(777,305	)		608,616
Total liabilities and shareholders’ equity	$	1,002,934	$	1,021,284	$	—	$	(863,248	)	$	1,160,970

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In thousands	Texas Industries, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Condensed consolidating balance sheet at May 31, 2006
Cash and cash equivalents	$	78,569	$	5,570	$	—	$	—		$	84,139
Short-term investments		50,606		—		—		—			50,606
Receivables – net		9,543		123,306		—		—			132,849
Intercompany receivables		585		93,160		—		(93,745	)		—
Inventories		—		102,052		—		—			102,052
Deferred income taxes and prepaid expenses		6,234		27,365		—		—			33,599
Total current assets		145,537		351,453		—		(93,745	)		403,245
Goodwill		—		58,395		—		—			58,395
Real estate and investments		96,347		29,566		—		—			125,913
Deferred charges and intangibles		16,790		5,916		—		—			22,706
Investment in subsidiaries		699,775		—		—		(699,775	)		—
Long-term intercompany receivables		50,000		—		—		(50,000	)		—
Property, plant and equipment – net		—		470,311		—		—			470,311
Total assets	$	1,008,449	$	915,641	$	—	$	(843,520	)	$	1,080,570
Accounts payable	$	184	$	63,397	$	—	$	—		$	63,581
Intercompany payables		93,160		585		—		(93,745	)		—
Accrued interest, wages and other items		14,102		40,957		—		—			55,059
Current portion of long-term debt		681		—		—		—			681
Total current liabilities		108,127		104,939		—		(93,745	)		119,321
Long-term debt		251,505		—		—		—			251,505
Convertible subordinated debentures		159,725		—		—		—			159,725
Long-term intercompany payables		—		50,000		—		(50,000	)		—
Deferred income taxes and other credits		16,028		60,927		—		—			76,955
Shareholders’ equity		473,064		699,775		—		(699,775	)		473,064
Total liabilities and shareholders’ equity	$	1,008,449	$	915,641	$	—	$	(843,520	)	$	1,080,570

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In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Condensed consolidating statement of operations for the three months ended February 28, 2007
Net sales	$	—		$	216,771		$	—	$	—		$	216,771
Cost of products sold		—			169,702			—		—			169,702
Gross profit		—			47,069			—		—			47,069
Selling, general and administrative		3,258			24,218			—		—			27,476
Interest		4,138			14			—		(863	)		3,289
Loss on debt retirements and spin-off charges		26			—			—		—			26
Other income		(818	)		(2,455	)		—		—			(3,273	)
Intercompany other income		(863	)		—			—		863			—
		5,741			21,777			—		—			27,518
Income (loss) before the following items		(5,741	)		25,292			—		—			19,551
Income taxes (benefit)		(1,956	)		8,794			—		—			6,838
		(3,785	)		16,498			—		—			12,713
Income from discontinued operations – net of income taxes		—			—			—		—			—
Equity in earnings of subsidiaries		16,498			—			—		(16,498	)		—
Net income (loss)	$	12,713		$	16,498		$	—	$	(16,498	)	$	12,713
Condensed consolidating statement of operations for the three months ended February 28, 2006
Net sales	$	—		$	216,763		$	—	$	—		$	216,763
Cost of products sold		—			179,397			—		—			179,397
Gross profit		—			37,366			—		—			37,366
Selling, general and administrative		2,222			18,265			—		—			20,487
Interest		7,837			366			—		(863	)		7,340
Loss on debt retirements and spin-off charges		—			—			—		—			—
Other income		(1,557	)		(3,717	)		—		—			(5,274	)
Intercompany other income		(863	)		—			—		863			—
		7,639			14,914			—		—			22,553
Income (loss) before the following items		(7,639	)		22,452			—		—			14,813
Income taxes (benefit)		(2,812	)		6,314			—		—			3,502
		(4,827	)		16,138			—		—			11,311
Income from discontinued operations – net of income taxes		—			—			—		—			—
Equity in earnings of subsidiaries		16,138			—			—		(16,138	)		—
Net income (loss)	$	11,311		$	16,138		$	—	$	(16,138	)	$	11,311

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In thousands	Texas Industries, Inc.			Guarantor Subsidiaries				Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Condensed consolidating statement of operations for the nine months ended February 28, 2007
Net sales	$	—		$	734,255			$	—	$	—		$	734,255
Cost of products sold		—			569,097				—		—			569,097
Gross profit		—			165,158				—		—			165,158
Selling, general and administrative		8,800			69,881				—		—			78,681
Interest		16,052			40				—		(2,618	)		13,474
Loss on debt retirements and spin-off charges		26			—				—		—			26
Other income		(3,986	)		(27,638	)			—		—			(31,624	)
Intercompany other income		(2,618	)		—				—		2,618			—
		18,274			42,283				—		—			60,557
Income (loss) before the following items		(18,274	)		122,875				—		—			104,601
Income taxes (benefit)		(6,652	)		40,457		��		—		—			33,805
		(11,622	)		82,418				—		—			70,796
Income from discontinued operations – net of income taxes		—			—				—		—			—
Equity in earnings of subsidiaries		82,418			—				—		(82,418	)		—
Net income (loss)	$	70,796		$	82,418			$	—	$	(82,418	)	$	70,796
Condensed consolidating statement of operations for the nine months ended February 28, 2006
Net sales	$	—		$	679,411			$	—	$	—		$	679,411
Cost of products sold		—			571,553				—		—			571,553
Gross profit		—			107,858				—		—			107,858
Selling, general and administrative		5,272			53,275				—		—			58,547
Interest		24,944			2,129				—		(2,618	)		24,455
Loss on debt retirements and spin-off charges		112,391			—				—		—			112,391
Other income		(4,424	)		(13,152	)			—		—			(17,576	)
Intercompany other income		(2,618	)		—				—		2,618			—
		135,565			42,252				—		—			177,817
Income (loss) before the following items		(135,565	)		65,606				—		—			(69,959	)
Income taxes (benefit)		(47,704	)		20,264				—		—			(27,440	)
		(87,861	)		45,342				—		—			(42,519	)
Income from discontinued operations – net of income taxes		—			(176	)			8,867		—			8,691
Equity in earnings of subsidiaries		54,033			—				—		(54,033	)		—
Net income (loss)	$	(33,828	)	$	45,166			$	8,867	$	(54,033	)	$	(33,828	)

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In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminating Entries		Consolidated
Condensed consolidating statement of cash flows for the nine months ended February 28, 2007
Operating activities
Cash provided by continuing operating activities	$	(108,829	)	$	234,580		$	—	$	—	$	125,751
Cash used by discontinued operating activities		—			—			—		—		—
Net cash provided by operating activities		(108,829	)		234,580			—		—		125,751
Investing activities
Capital expenditures – expansions		—			(170,217	)		—		—		(170,217	)
Capital expenditures – other		—			(66,222	)		—		—		(66,222	)
Proceeds from asset disposals		—			961			—		—		961
Purchases of short-term investments		(8,500	)		—			—		—		(8,500	)
Sales of short-term investments		59,000			—			—		—		59,000
Investments in life insurance contracts		(5,288	)		—			—		—		(5,288	)
Intercompany investing activities		—			—			—		—		—
Other – net		—			(125	)		—		—		(125	)
Cash used by continuing investing activities		45,212			(235,603	)		—		—		(190,391	)
Cash used by discontinued investing activities		—			—			—		—		—
Net cash used by investing activities		45,212			(235,603	)		—		—		(190,391	)
Financing activities
Long-term borrowings		—			—			—		—		—
Debt retirements		(1,285	)		—			—		—		(1,285	)
Debt issuance costs		—			—			—		—		—
Debt retirement costs		(4	)		—			—		—		(4	)
Stock option exercises		5,976			—			—		—		5,976
Excess tax benefits from stock-based compensation		1,647			—			—		—		1,647
Common dividends paid		(5,468	)		—			—		—		(5,468	)
Cash provided (used) by continuing financing activities		866			—			—		—		866
Cash provided by discontinued financing activities		—			—			—		—		—
Net cash provided (used) by financing activities		866			—			—		—		866
Decrease in cash and cash equivalents		(62,751	)		(1,023	)		—		—		(63,774	)
Cash and cash equivalents at beginning of period		78,569			5,570			—		—		84,139
Cash and cash equivalents at end of period	$	15,818		$	4,547		$	—	$	—	$	20,365

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In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Condensed consolidating statement of cash flows for the nine months ended February 28, 2006
Operating activities
Cash provided by continuing operating activities	$	3,754		$	39,233		$	—		$	11,013		$	54,000
Cash used by discontinued operating activities		—			—			3,309			(11,013	)		(7,704	)
Net cash provided by operating activities		3,754			39,233			3,309			—			46,296
Investing activities
Capital expenditures – expansions		—			(36,061	)		—			—			(36,061	)
Capital expenditures – other		—			(27,512	)		—			—			(27,512	)
Proceeds from asset disposals		—			14,509			—			—			14,509
Purchases of short-term investments		(48,500	)		—			—			—			(48,500	)
Sales of short-term investments		—			—			—			—			—
Investments in life insurance contracts		(4,071	)		—			—			—			(4,071	)
Intercompany investing activities		341,139			—			—			(341,139	)		—
Other – net		(2,367	)		352			—			—			(2,015	)
Cash used by continuing investing activities		286,201			(48,712	)		—			(341,139	)		(103,650	)
Cash used by discontinued investing activities		—			—			(343,896	)		341,139			(2,757	)
Net cash used by investing activities		286,201			(48,712	)		(343,896	)		—			(106,407	)
Financing activities
Long-term borrowings		250,000			—			—			—			250,000
Debt retirements		(600,353	)		—			—			—			(600,353	)
Debt issuance costs		(7,356	)		—			—			—			(7,356	)
Debt retirement costs		(96,029	)		—			—			—			(96,029	)
Stock option exercises		7,028			—			—			—			7,028
Excess tax benefits from stock-based compensation		—			—			—			—			—
Common dividends paid		(5,172	)		—			—			—			(5,172	)
Cash provided (used) by continuing financing activities		(451,882	)		—			—			—			(451,882	)
Cash provided by discontinued financing activities		—			—			340,587			—			340,587
Net cash provided (used) by financing activities		(451,882	)		—			340,587			—			(111,295	)
Decrease in cash and cash equivalents		(161,927	)		(9,479	)		—			—			(171,406	)
Cash and cash equivalents at beginning of period		241,287			10,313			—			—			251,600
Cash and cash equivalents at end of period	$	79,360		$	834		$	—		$	—		$	80,194

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EXHIBIT A

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, 2007, and the related consolidated statements of operations for the three and nine-month periods ended February 28, 2007 and 2006 and cash flows for the nine-month periods ended February 28, 2007 and 2006. 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, 2006, 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 19, 2006, 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, 2006, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Dallas, Texas

March 29, 2007

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

We are a leading supplier of heavy building construction materials in the United States through 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. Other products include expanded shale and clay aggregates, produced and sold through our aggregates segment, and packaged concrete and related products produced and sold through our consumer products segment. Our facilities are concentrated primarily in Texas, Louisiana and California.

RESULTS OF OPERATIONS

The following table highlights certain of our operating information.

	Three-months ended February 28,						Nine-months ended February 28,
In thousands except per unit	2007			2006			2007			2006
Sales
Cement	$	107,143		$	104,290		$	355,828		$	319,807
Stone, sand and gravel		33,043			34,645			113,832			111,368
Ready-mix concrete		57,007			59,732			202,591			196,021
Other products		26,048			29,302			88,717			82,084
Interplant		(23,890	)		(29,165	)		(85,414	)		(87,595	)
Delivery fees		17,420			17,959			58,701			57,726
Net Sales	$	216,771		$	216,763		$	734,255		$	679,411
Shipments
Cement (tons)		1,122			1,164			3,749			3,747
Stone, sand and gravel (tons)		4,527			5,417			16,561			18,684
Ready-mix concrete (cubic yards)		736			847			2,695			2,859
Prices
Cement ($/ton)	$	95.50		$	89.62		$	94.91		$	85.35
Stone, sand and gravel ($/ton)		7.30			6.40			6.87			5.96
Ready-mix concrete ($/cubic yard)		77.49			70.49			75.19			68.54
Cost of sales
Cement ($/ton)	$	61.98		$	65.36		$	64.10		$	65.73
Stone, sand and gravel ($/ton)		6.56			5.96			5.59			5.18
Ready-mix concrete ($/cubic yard)		76.38			71.18			71.80			67.16

Gross profit for the three-month period ended February 28, 2007 was $47.1 million, an increase of $9.7 million from the prior year period. Gross profit for the nine-month period ended February 28, 2007 was $165.2 million, an increase of $57.3 million. The increases were primarily the result of improved product pricing and lower cement unit costs.

Sales.Net sales for the three-month period ended February 28, 2007 were $216.8 million, which was comparable to the prior year period. Total cement sales increased $2.9 million on 7% higher average prices and 4% lower shipments. Total stone, sand and gravel sales decreased $1.6 million on 14% higher average prices and 16% lower shipments. Total ready-mix concrete sales decreased $2.7 million on 10% higher average prices and 13% lower volumes.

Net sales for the nine-month period ended February 28, 2007 were $734.3 million, an increase of $54.8 million from the prior year period. Total cement sales increased $36.0 million on 11% higher average prices and comparable shipments. Total stone, sand and gravel sales increased $2.5 million on 15% higher average prices and 11% lower shipments. Total ready-mix concrete sales increased $6.6 million on 10% higher average prices and 6% lower volumes.

- 28 -

Adverse weather (low temperatures, ice and above average rainfall) in our north Texas market area reduced shipments of all of our major products in the current three-month period. In addition, stone, sand and gravel shipments were lower in the current periods due to the expiration of a low margin, large supply contract at the beginning of the current fiscal year. Average prices for our major products have continued to improve. Market conditions have continued to support our current level of pricing.

Cost of Products Sold.Cost of products sold for the three-month period ended February 28, 2007 was $169.7 million, a decrease of $9.7 million from the prior year period. Cement unit costs decreased 5%. Stone, sand and gravel unit costs increased 10%. Ready-mix concrete unit costs increased 7%.

Cost of products sold for the nine-month period ended February 28, 2007 was $569.1 million, a decrease of $2.5 million from the prior year period. Cement unit costs decreased 2%. Stone, sand and gravel unit costs increased 8%. Ready-mix concrete unit costs increased 7%.

Overall energy costs declined from the prior year periods and contributed to lower cement unit costs. Stone, sand and gravel overall unit cost of sales increased primarily due to lower productivity caused by the adverse weather conditions in north Texas and also reduced shipments. Ready-mix concrete unit costs increased primarily due to the higher cost of cement and aggregate raw materials.

Selling, General and Administrative.Selling, general and administrative expense for the three-month period ended February 28, 2007 was $27.5 million, an increase of $7.0 million from the prior year period. Operating selling, general and administrative expense increased $4.4 million primarily due to $1.7 million higher incentive compensation expense, $700,000 higher wages and benefits and $400,000 higher stock-based compensation. Corporate selling, general and administrative expense increased $2.6 million primarily due to $1.6 million higher incentive compensation expense and $900,000 higher stock-based compensation expense.

Selling, general and administrative expense for the nine-month period ended February 28, 2007 was $78.7 million, an increase of $20.1 million from the prior year period. Operating selling, general and administrative expense increased $10.2 million primarily due to $5.2 million higher incentive compensation expense, $1.4 million higher wages and benefits and $1.1 million higher stock-based compensation expense. Corporate selling, general and administrative expense increased $9.9 million primarily due to $6.6 million higher incentive compensation expense and $2.7 million higher stock-based compensation expense.

Other Income.Other income for the three-month period ended February 28, 2007 was $3.3 million, a decrease of $2.0 million from the prior year period primarily due to lower gains from the routine sale of surplus operating assets and real estate. Other income for the nine-month period ended February 28, 2007 was $31.6 million, an increase of $14.0 million from the prior year period. Other income in the current nine-month period includes operating other income of $19.8 million representing distributions which we received pursuant to agreements that settled a 16-year dispute over the U.S. antidumping duty order on cement imports from Mexico. Other income in the prior year nine-month period includes corporate other income of $3.8 million resulting from the sale of certain investment assets.

Interest Expense. Interest expense for the three-month period ended February 28, 2007 was $3.3 million, a decrease of $4.1 million from the prior year period. Interest expense for the nine-month period ended February 28, 2007 was $13.5 million, a decrease of $11.0 million from the prior year period. Interest expense capitalized in conjunction with our Oro Grande, California cement plant expansion and modernization project reduced the amount of interest expense recognized by $3.7 million in the current three-month period and $8.1 million in the current nine-month period. Total interest expense to be capitalized related to this project during the two year construction period is currently estimated at $25 million. Also contributing to lower interest expense in the current nine-month period was our prior year debt refinancing in connection with the spin-off of Chaparral Steel Company.

Loss on Debt Retirements and Spin-off Charges.Loss on debt retirements and spin-off charges for the nine-month period ended February 28, 2006 includes a loss of $107.0 million related to the early retirement of our 10.25% senior notes and former credit facility, consisting of $96.0 million in premiums and consent payments plus transaction costs, and a write-off of $11.0 million of debt issuance costs and interest rate swap gains and losses associated with the debt purchased. In addition, we incurred $5.4 million in charges related to the spin-off of Chaparral in July 2005.

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Income Taxes.Federal income taxes for the interim periods ended February 28, 2007 and 2006 have been included in the accompanying financial statements on the basis of an estimated annual rate for continuing operations. The estimated annualized rate for continuing operations does not include the tax impact of the loss on debt retirements and Chaparral spin-off charges and other discrete items. The estimated annualized rate for continuing operations excluding these charges is 32.1% for 2007 compared to 27.1% for 2006. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income taxes. The estimated effective rate for discontinued operations is 35% for 2006, and reflects Chaparral’s allocable share of such tax as prescribed in our tax sharing agreement with Chaparral.

Income from Discontinued Operations - Net of Income Taxes. As a result of the spin-off of Chaparral, the operating results of our steel segment, including the allocation of certain corporate expenses, have been presented as discontinued operations. The nine-month period ended February 28, 2006 includes steel operations through the July��29, 2005 spin-off date.

LIQUIDITY AND CAPITAL RESOURCES

In addition to cash and cash equivalents of $20.4 million at February 28, 2007, our sources of liquidity include cash from operations, borrowings available under our $200 million senior secured revolving credit facility and distributions available from our investments in life insurance contracts.

Senior Secured Revolving Credit Facility.We have available a $200 million senior secured revolving credit facility expiring in July 2010. It includes a $50 million sub-limit for letters of credit. Any outstanding letters of credit are deducted from the borrowing availability under the facility. At February 28, 2007, $29.5 million of the facility was utilized to support letters of credit. Amounts drawn under the facility bear interest either at the LIBOR rate plus a margin of 1% to 2%, or at a base rate (which is the higher of the federal funds rate plus 0.5% and the prime rate) plus a margin of up to 1%. The interest rate margins are subject to adjustments based on our leverage ratio.

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

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

Investments in Life Insurance Contracts.In connection with certain of our benefit plans, we have purchased life insurance contracts having a total cash surrender value of $104.2 million as of February 28, 2007. During fiscal year 2005 we repaid previous distributions received from our investments in life insurance contracts in the amount of $51.2 million. Approximately $50 million of these funds are available for redistribution at our election.

Capital Expenditure Commitments.During fiscal year 2006, we commenced construction on a project to expand and modernize our Oro Grande, California cement plant. We plan to expand the Oro Grande plant to approximately 2.3 million tons of advanced dry process cement production capacity annually, and retire the 1.3 million tons of existing, but less efficient, production after the new plant is commissioned. We expect the Oro Grande project will cost approximately $358 million excluding capitalized interest related to the project, of which $240.4 million has been incurred as of February 28, 2007. The new plant is expected to commence operation by the end of calendar year 2007. We expect our capital expenditures for the remainder of fiscal year 2007, including those related to the expansion and modernization of our Oro Grande cement plant, to be approximately $65 million.

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Convertible Subordinated Debentures. In conjunction with the conversion or redemption of the preferred securities of TXI Capital Trust I, during the three-month period ended February 28, 2007, a total of $66.4 million aggregate principal amount of our 5.5% convertible subordinated debentures were converted into 1,293,379 shares of our common stock, and a total of $900,000 aggregate principal amount of debentures were redeemed. In March 2007, an additional $91.5 million aggregate principal amount of debentures were converted into 1,783,466 shares of our common stock, and the remaining $900,000 aggregate principal amount of debentures outstanding were redeemed.

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

Cash Flows

Net cash provided by continuing operating activities for the nine-month period ended February 28, 2007 was $125.8 million compared to $54.0 million for the prior year period. The increase resulted primarily from higher net income and its related effects on deferred income taxes and changes in working capital items.

Net cash used by continuing investing activities for the nine-month period ended February 28, 2007 was $190.4 million compared to $103.7 million for the prior year period. Capital expenditures incurred in connection with the expansion and modernization of our Oro Grande, California cement plant were $170.2 million, up $134.2 million from the prior year period. Capital expenditures for normal replacement and technological upgrades of existing equipment and acquisitions to sustain our existing operations were $66.2 million, up $38.7 million from the prior year period. In the current period, we decreased our investments in auction rate securities $50.5 million. In the prior year period we invested $48.5 million in auction rate securities.

Net cash provided by continuing financing activities for the nine-month period ended February 28, 2007 was $900,000 compared to $451.9 million used in the prior year period. In the prior year period we purchased $600 million aggregate principal amount of our 10.25% senior notes, paying $96.0 million in premiums and consent payments plus transaction costs. To fund the purchase we issued $250 million aggregate principal amount of our 7.25% senior notes and incurred $7.4 million in debt issuance costs, received a cash dividend of $341.1 million from Chaparral and used $112.3 million of cash and cash equivalents on hand.

Net cash provided by discontinued operations was $330.1 million for the nine-month period ended February 28, 2006. In connection with our refinancing and spin-off transactions, Chaparral issued $300 million aggregate principal amount of senior notes and borrowed $50 million under its new $150 million credit facility. The net proceeds were used to pay us a dividend of $341.1 million.

OTHER ITEMS

Environmental Matters

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

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Market Risk

Historically, we have not entered into derivatives or other financial instruments for trading or speculative purposes. 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.

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

Critical Accounting Policies

The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The critical accounting policies that affect the more complex judgments and estimates are described in our Annual Report on Form 10-K for the year ended May 31, 2006.

New Accounting Standards.

Stock-based Compensation.Effective June 1, 2006, we adopted SFAS No. 123R, “Share-Based Payment,” utilizing the modified prospective transition method. Under this transition method, we account for awards granted prior to adoption, but for which the vesting period is not complete, on a prospective basis with expense being recognized in our statement of operations based on the grant date fair value estimated in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation.” We use the Black-Scholes option-pricing model to determine the fair value of stock options granted as of the date of grant. We use the average stock price on the date of grant to determine the fair value of restricted stock awards granted. The impact of recognizing compensation expense related to stock options using the fair value recognition provisions of SFAS No. 123R for the three-month period ended February 28, 2007 was $700,000 (net of tax benefit of $200,000) or $.03 per basic share and $.03 per diluted share, and for the nine-month period ended February 28, 2007 was $2.0 million (net of tax benefit of $400,000) or $.08 per basic share and $.07 per diluted share. The results for periods prior to June 1, 2006 have not been restated.

SFAS No. 123R also requires that the benefits associated with tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as previously required. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts can not be estimated, because they depend on, among other things, when employees exercise stock options. For the nine-month period ended February 28, 2007 excess tax benefits recognized in financing cash flows were $1.6 million.

Inventory Costs.On June 1, 2006, we adopted SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” This standard clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be expensed as incurred and not included in overhead. In addition, this standard requires that the allocation of fixed production overhead costs to inventory be based on the normal capacity of the production facilities. The adoption of this standard did not have an effect on our consolidated financial position or results of operations.

Accounting for Mining Stripping Costs.On June 1, 2006, we adopted, Emerging Issues Task Force Issue 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry,” which requires that stripping costs incurred during the production phase of the mine be included in the costs of the inventory produced during the period that the stripping costs are incurred. As of May 31, 2006, the balance of our capitalized post-production stripping costs was $7.9 million. In accordance with the transition provision of EITF 04-6, we wrote off these deferred costs, effective June 1, 2006, and recorded a charge to retained earnings of $4.9 million, net of tax benefits of $3.0 million. We will now recognize the costs of all post-production stripping activity as a cost of the inventory produced during the period the stripping costs are incurred. Although dependent in part on the future level of post-production stripping activity which varies from period to period, we do not expect that EITF 04-6 will have a material impact on our financial position or results of operations for periods following adoption.

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Accounting for Income Taxes.In July 2006, the Financial Accounting Standards Board issued FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes,” which will be effective for our Company beginning June 1, 2007. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes” and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We are currently evaluating the impact this interpretation will have on our consolidated financial statements.

Fair Value Measurements.In September 2006, the Financial Accounting Standards Board issued SFAS No. 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS is effective for our Company beginning June 1, 2008. We believe that the adoption of SFAS No. 157 will not have a material impact on our consolidated financial statements.

Accounting for Defined Benefit Pension and other Postretirement Plans.In September 2006, the Financial Accounting Standards Board issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This standard requires that previously unrecognized actuarial gains or losses, prior service costs or credits and transition obligations or assets be recognized generally through adjustments to accumulated other comprehensive income and credits to prepaid benefit cost or accrued benefit liability. As a result of these adjustments, the current funded status of defined benefit pension plans and other postretirement benefit plans will be reflected in our consolidated balance sheet as of May 31, 2007.

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

Certain statements contained in this quarterly report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on our business, the level of construction activity in our markets, abnormal periods of inclement weather, unexpected periods of equipment downtime, changes in the cost of raw materials, fuel and energy, the impact of environmental laws and other regulations, and the risks and uncertainties described in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended May 31, 2006.

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, which disclosed no significant deficiencies or material weaknesses, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There were no significant 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 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities. We did not purchase any of our Common Stock on the open market during the three-month period ended February 28, 2007. However, we repurchased shares of our Common Stock in connection with so-called “stock swap exercises” of employee stock options in which shares are surrendered or deemed surrendered to us to pay the exercise price or to satisfy tax withholding obligations. The following table presents information with respect to such repurchases.

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
December 1, 2006 – December 31, 2006	—	$	—	N/A	N/A
January 1, 2007 – January 31, 2007	5,929		72.02	N/A	N/A
February 1, 2007 – February 28, 2007	—		—	N/A	N/A
Total	5,929	$	72.02	N/A	N/A

Item 6. Exhibits

The following exhibits are included herein:

3.1	Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K dated August 28, 1996, File No. 001-04887)
3.2	By-laws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K dated April 13, 2005, File No. 001-04887)
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 Rights Agreement dated as of November 1, 2006, between Texas Industries, Inc. and Mellon Investor Services, LLC (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on October 20, 2006, File No. 001-04887)
4.2	Form of Amended and Restated Trust Agreement, dated as of June 5, 1998, among Texas Industries, Inc., The First National Bank of Chicago, First Chicago Delaware, Inc., Kenneth R. Allen, Larry L. Clark and James R. McCraw (incorporated by reference to Exhibit 4.5 to Form S-3/A dated June 1, 1996, File No. 333-50517)
4.3	Form of Convertible Subordinated Debenture Indenture, dated as of June 5, 1998, between Texas Industries, Inc. and First Chicago Delaware Inc. (incorporated by reference to Exhibit 4.6 to Form S-3/A dated June 1, 1996, File No. 333-50517)
4.4	Form of Guarantee Agreement, dated as of June 5, 1998, by Texas Industries, Inc. and First Chicago Delaware Inc. (incorporated by reference to Exhibit 4.7 to Form S-3/A dated June 1, 1996, File No. 333-50517)
4.5	Form of the Company’s 7 1/4% Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
4.6	Form of the Company’s Notation of Guarantee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)

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4.7	Registration Rights Agreement, dated July 6, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
4.8	Indenture, dated July 6, 2005, among the Company, the Guarantors and Wells Fargo, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.1	Purchase Agreement, dated June 29, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.2	Credit Agreement, dated July 6, 2005, among the Company, Bank of America, N.A., as Administrative Agent and lender, L/C Issuer and Swing Line Lender, UBS Securities LLC, as Syndication Agent, and certain lenders (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.3	Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.4	Amendment No. 1 to Separation and Distribution Agreement dated as of July 27, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated July 27, 2005, File No. 001-04887)
10.5	Tax Sharing and Indemnification Agreement, dated July 6, 2005, between the Company and Chaparral (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.6	Security Agreement, dated as of July 6, 2005, among the Company, the Guarantors and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.7	Employment Agreement of Mel G. Brekhus (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 22, 2007)
10.8	Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 as filed May 19, 1994, File No. 033-53715)
10.9	Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.10	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)
10.11	Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated April 19, 2006)
10.12	TXI Annual Incentive Plans-Fiscal Year 2007 (incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K filed on July 25, 2006)
10.13	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2009 (incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K filed on July 25, 2006)
10.14	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2008, as amended (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on July 25, 2006)
10.15	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2007, as amended (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on July 25, 2006)

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10.16	Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006)
10.17	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, File No. 001-04887)
10.18	Form of SAR Agreement for Non-Employee Directors under Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on August 12, 2005, File No. 001-04887)
10.19	Form of Amendment No. 1 to SAR Agreement for Non-Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K dated April 19, 2006)
10.20	SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan between Texas Industries, Inc. and Mel G. Brekhus, dated June 1, 2004 (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K filed on July 25, 2006)
10.21	Amendment No. 1 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated April 24, 2006 (incorporated by reference to Exhibit 10.23 to Annual Report on Form 10-K filed on July 25, 2006)
10.22	Contract, dated September 27, 2005, between Riverside Cement Company and Oro Grande Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated September 27, 2005, noting that portions of the exhibit were omitted pursuant to a request for confidential treatment)
10.23	Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated January 18, 2006)
10.24	Form of 2005 Executive Financial Security Plan (Annuity Formula) (incorporated by reference to Exhibit 10.25 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.25	Form of 2005 Executive Financial Security Plan (Lump Sum Formula) ) (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.26	Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated April 19, 2006)
12.1	Computation of Ratios of Earnings to Fixed Charges
15.1	Letter re: Unaudited Interim Financial Information
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

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

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SIGNATURES

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

	TEXAS INDUSTRIES, INC.
March 29, 2007	/s/ Richard M. Fowler
	Richard M. Fowler
	Executive Vice President - Finance and Chief Financial Officer (Principal Financial Officer)
March 29, 2007	/s/ James R. McCraw
	James R. McCraw
	Vice President – Accounting and Risk Management (Principal Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number
3.1	Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K dated August 28, 1996, File No. 001-04887)
3.2	By-laws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K dated April 13, 2005, File No. 001-04887)
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 Rights Agreement dated as of November 1, 2006, between Texas Industries, Inc. and Mellon Investor Services, LLC (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on October 20, 2006, File No. 001-04887)
4.2	Form of Amended and Restated Trust Agreement, dated as of June 5, 1998, among Texas Industries, Inc., The First National Bank of Chicago, First Chicago Delaware, Inc., Kenneth R. Allen, Larry L. Clark and James R. McCraw (incorporated by reference to Exhibit 4.5 to Form S-3/A dated June 1, 1996, File No. 333-50517)
4.3	Form of Convertible Subordinated Debenture Indenture, dated as of June 5, 1998, between Texas Industries, Inc. and First Chicago Delaware Inc. (incorporated by reference to Exhibit 4.6 to Form S-3/A dated June 1, 1996, File No. 333-50517)
4.4	Form of Guarantee Agreement, dated as of June 5, 1998, by Texas Industries, Inc. and First Chicago Delaware Inc. (incorporated by reference to Exhibit 4.7 to Form S-3/A dated June 1, 1996, File No. 333-50517)
4.5	Form of the Company’s 7 1/4% Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
4.6	Form of the Company’s Notation of Guarantee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
4.7	Registration Rights Agreement, dated July 6, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
4.8	Indenture, dated July 6, 2005, among the Company, the Guarantors and Wells Fargo, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.1	Purchase Agreement, dated June 29, 2005, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.2	Credit Agreement, dated July 6, 2005, among the Company, Bank of America, N.A., as Administrative Agent and lender, L/C Issuer and Swing Line Lender, UBS Securities LLC, as Syndication Agent, and certain lenders (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)

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Index to Exhibits-(Continued)

Exhibit Number
10.3	Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.4	Amendment No. 1 to Separation and Distribution Agreement dated as of July 27, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated July 27, 2005, File No. 001-04887)
10.5	Tax Sharing and Indemnification Agreement, dated July 6, 2005, between the Company and Chaparral (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.6	Security Agreement, dated as of July 6, 2005, among the Company, the Guarantors and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K dated June 29, 2005, File No. 001-04887)
10.7	Employment Agreement of Mel G. Brekhus (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 22, 2007)
10.8	Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 as filed May 19, 1994, File No. 033-53715)
10.9	Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.10	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)
10.11	Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated April 19, 2006)
10.12	TXI Annual Incentive Plans-Fiscal Year 2007 (incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K filed on July 25, 2006)
10.13	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2009 (incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K filed on July 25, 2006)
10.14	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2008, as amended (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on July 25, 2006)
10.15	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2007, as amended (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on July 25, 2006)
10.16	Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006)
10.17	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, File No. 001-04887)
10.18	Form of SAR Agreement for Non-Employee Directors under Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on August 12, 2005, File No. 001-04887)

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Index to Exhibits-(Continued)

Exhibit Number
10.19	Form of Amendment No. 1 to SAR Agreement for Non-Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K dated April 19, 2006)
10.20	SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan between Texas Industries, Inc. and Mel G. Brekhus, dated June 1, 2004 (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K filed on July 25, 2006)
10.21	Amendment No. 1 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, by and between Texas Industries, Inc. and Mel G. Brekhus dated April 24, 2006 (incorporated by reference to Exhibit 10.23 to Annual Report on Form 10-K filed on July 25, 2006)
10.22	Contract, dated September 27, 2005, between Riverside Cement Company and Oro Grande Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated September 27, 2005, noting that portions of the exhibit were omitted pursuant to a request for confidential treatment)
10.23	Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated January 18, 2006)
10.24	Form of 2005 Executive Financial Security Plan (Annuity Formula) (incorporated by reference to Exhibit 10.25 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.25	Form of 2005 Executive Financial Security Plan (Lump Sum Formula) (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.26	Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated April 19, 2006)
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

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