Texas Industries 10-Q 2008 Q1 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 August 31, 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 27,350,113 shares of the Registrant’s Common Stock, $1.00 par value, outstanding as of September 24, 2007.

INDEX

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – August 31, 2007 and May 31, 2007	3
	Consolidated Statements of Operations – three months ended August 31, 2007 and August 31, 2006	4
	Consolidated Statements of Cash Flows – three months ended August 31, 2007 and August 31, 2006	5
	Notes to Consolidated Financial Statements	6
	Report of Independent Registered Public Accounting Firm	21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk – the information required by this item is included in Item 2	—
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
SIGNATURES

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CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

In thousands	Unaudited August 31, 2007			May 31, 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	5,165		$	15,138
Receivables – net		160,079			142,610
Inventories		112,517			121,467
Deferred income taxes and prepaid expenses		13,047			17,621
TOTAL CURRENT ASSETS		290,808			296,836
OTHER ASSETS
Goodwill		58,395			58,395
Real estate and investments		112,217			111,414
Deferred charges and intangibles		12,031			11,369
		182,643			181,178
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements		133,311			132,992
Buildings		40,760			41,485
Machinery and equipment		771,453			752,531
Construction in progress		420,907			362,646
		1,366,431			1,289,654
Less depreciation and depletion		510,881			505,432
		855,550			784,222
	$	1,329,001		$	1,262,236
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	94,516		$	109,749
Accrued interest, wages and other items		41,710			57,891
Current portion of long-term debt		213			1,340
TOTAL CURRENT LIABILITIES		136,439			168,980
LONG-TERM DEBT		353,585			274,416
DEFERRED INCOME TAXES AND OTHER CREDITS		89,400			90,358
SHAREHOLDERS’ EQUITY
Common stock, $1 par value		27,350			27,323
Additional paid-in capital		453,488			448,289
Retained earnings		272,950			257,087
Accumulated other comprehensive loss		(4,211	)		(4,217	)
		749,577			728,482
	$	1,329,001		$	1,262,236

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended August 31,
In thousands except per share	2007			2006
NET SALES	$	263,454		$	271,652
Cost of products sold		217,437			205,338
GROSS PROFIT		46,017			66,314
Selling, general and administrative		22,183			21,058
Interest		—			5,542
Other income		(2,253	)		(3,551	)
		19,930			23,049
INCOME BEFORE INCOME TAXES		26,087			43,265
Income taxes		8,173			13,834
NET INCOME	$	17,914		$	29,431
Net income per share
Basic	$	.66		$	1.23
Diluted	$	.64		$	1.12
Average shares outstanding
Basic		27,333			23,959
Diluted		27,896			27,515
Cash dividends per share	$	.075		$	.075

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended August 31,
In thousands	2007			2006
OPERATING ACTIVITIES
Net income	$	17,914		$	29,431
Adjustments to reconcile net income to cash provided by operating activities
Gain on asset disposals		(455	)		(490	)
Depreciation, depletion and amortization		13,318			11,172
Deferred income taxes		513			3,777
Stock-based compensation expense (credit)		(1,717	)		554
Excess tax benefits from stock-based compensation		(3,287	)		(881	)
Other – net		(142	)		(175	)
Changes in operating assets and liabilities
Receivables – net		(17,458	)		(6,218	)
Inventories		8,950			722
Prepaid expenses		1,735			953
Accounts payable and accrued liabilities		(5,319	)		(2,782	)
Net cash provided by operating activities		14,052			36,063
INVESTING ACTIVITIES
Capital expenditures – expansions		(76,361	)		(47,702	)
Capital expenditures – other		(27,231	)		(16,416	)
Proceeds from asset disposals		1,288			987
Purchases of short-term investments		—			(8,500	)
Sales of short-term investments		—			20,000
Investments in life insurance contracts		(415	)		(2,402	)
Other – net		(24	)		297
Net cash used by investing activities		(102,743	)		(53,736	)
FINANCING ACTIVITIES
Long-term borrowings		124,000			—
Debt retirements		(46,173	)		(1	)
Debt issuance costs		(944	)		—
Stock option exercises		599			752
Excess tax benefits from stock-based compensation		3,287			881
Common dividends paid		(2,051	)		(1,798	)
Net cash provided (used) by financing activities		78,718			(166	)
Decrease in cash and cash equivalents		(9,973	)		(17,839	)
Cash and cash equivalents at beginning of period		15,138			84,139
Cash and cash equivalents at end of period	$	5,165		$	66,300

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

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 three-month period ended August 31, 2007, are not necessarily indicative of the results that may be expected for the year ended May 31, 2008. 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, 2007.

Principles of Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and all subsidiaries except a former subsidiary trust, in which we had a variable interest but were not the primary beneficiary.

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.

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.

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.

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Major Maintenance Activities.Maintenance and repairs are charged to expense as incurred. Effective June 1, 2007, we adopted Financial Accounting Standards Board FSP AUG AIR-1, “Accounting for Planned Major Maintenance Activities.” This FSP addresses the planned major maintenance of assets and prohibits the use of the “accrue-in-advance” method of accounting for these activities. The adoption of this FSP did not have any impact on our consolidated financial statements.

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 August 31, 2007 and May 31, 2007 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 $6.1 million at August 31, 2007 and $6.2 million at May 31, 2007.

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 $105.9 million (net of distributions of $1.2 million) at August 31, 2007 and $105.0 million (net of distributions of $1.2 million) at May 31, 2007.

Deferred Charges and Intangibles.Deferred charges are composed primarily of debt issuance costs that totaled $6.1 million at August 31, 2007 and $5.4 million at May 31, 2007. 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 a 15-year period. Their carrying value, adjusted for write-offs, totaled $1.0 million (net of accumulated amortization of $2.9 million) at August 31, 2007 and $1.1 million (net of accumulated amortization of $2.8 million) at May 31, 2007. Amortization expense incurred was $100,000 in each of the three-month periods ended August 31, 2007 and 2006. Estimated amortization expense for each of the five succeeding years is approximately $300,000 for 2008 and 2009, $200,000 for 2010 and 2011, and none for 2012.

Other Credits.Other credits of $61.4 million at August 31, 2007 and $62.9 million at May 31, 2007 are composed primarily of liabilities related to our retirement plans, deferred compensation agreements and asset retirement obligations.

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

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

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Changes in asset retirement obligations are as follows:

	Three months ended August 31,
In thousands	2007			2006
Balance at beginning of period	$	4,987		$	4,346
Additions		—			63
Accretion expense		95			105
Settlements		(374	)		(209	)
Balance at end of period	$	4,708		$	4,305

Accumulated Other Comprehensive Loss.Amounts recognized in accumulated other comprehensive loss represent adjustments related to a defined benefit retirement plan and a postretirement health benefit plan covering approximately 600 employees and retirees of our California cement subsidiary. The amounts totaled $4.2 million (net of tax of $2.5 million) at August 31, 2007 and May 31, 2007.

Comprehensive income for the three-month periods ending August 31, 2007 and 2006 consisted of net income and amounts in accumulated other comprehensive loss recognized as components of net periodic postretirement benefit cost, net of tax. These recognized amounts were not significant, and therefore, comprehensive income approximated net income for the periods.

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.Routine sales of surplus operating assets and real estate resulted in gains of $700,000 and $500,000 in the three-month periods ended August 31, 2007 and 2006, respectively. Interest income totaled $400,000 and $2.1 million in the three-month periods ended August 31, 2007 and 2006, respectively.

Income Taxes. Accounting for income taxes uses the liability method of recognizing and classifying deferred income taxes. Texas Industries, Inc. (the parent 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. Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense.

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. Options with graded vesting are valued as single awards and the related compensation cost is recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. We use the average stock price on the date of grant to determine the fair value of restricted stock awards paid.

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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 our former stock awards program. The deferred compensation is denominated in shares of our common stock and issued in accordance with the terms of the agreement subsequent to retirement or separation from us. The shares are considered contingently issuable because the director has an unconditional right to the shares to be issued. Vested stock award shares are issued in the year in which the employee reaches age 60.

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

Basic and Diluted EPS are calculated as follows:

	Three-months ended August 31,
In thousands except per share	2007			2006
Basic earnings
Net income	$	17,914		$	29,431
Unvested restricted share participation		(10	)		(10	)
Basic income	$	17,904		$	29,421
Diluted earnings
Net income	$	17,914		$	29,431
Interest on convertible subordinated debentures - net of tax		—			1,427
Unvested restricted share participation		(10	)		(10	)
Diluted income	$	17,904		$	30,848
Shares
Weighted-average shares outstanding		27,341			23,961
Contingently issuable shares		7			6
Unvested restricted shares		(15	)		(8	)
Basic weighted-average shares		27,333			23,959
Convertible subordinated debentures		—			3,113
Stock option, restricted share and award dilution		563			443
Diluted weighted-average shares*		27,896			27,515
Net income per share
Basic	$	.66		$	1.23
Diluted	$	.64		$	1.12
*        Shares excluded due to antidilutive effect
Stock options, restricted shares and awards		—			220

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WORKING CAPITAL

Working capital totaled $154.4 million at August 31, 2007, compared to $127.9 million at May 31, 2007.

Receivables consist of:

In thousands	August 31, 2007		May 31, 2007
Accounts receivable	$	138,368	$	121,282
Notes receivable including accrual interest		21,711		21,328
	$	160,079	$	142,610

Accounts receivable are presented net of allowances for doubtful receivables of $1.3 million at August 31, 2007 and May 31, 2007. Provisions for bad debts charged to expense were $100,000 in each of the three-month periods ended August 31, 2007 and 2006. Uncollectible accounts written off totaled $100,000 in each of the three-month periods ended August 31, 2007 and 2006. Notes receivable included in current receivables relate to routine sales of surplus operating assets and real estate.

Inventories consist of:

In thousands	August 31, 2007		May 31, 2007
Finished products	$	7,578	$	12,190
Work in process		50,727		56,628
Raw materials		18,569		16,300
Total inventories at LIFO cost		76,874		85,118
Parts and supplies		35,643		36,349
Total inventories	$	112,517	$	121,467

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 costs and are subject to the final year-end LIFO inventory valuation. If the average cost method (which approximates current replacement cost) had been used for all of these inventories, inventory values would have been higher by $27.0 million at August 31, 2007 and May 31, 2007.

Accrued interest, wages and other items consist of:

In thousands	August 31, 2007		May 31, 2007
Interest	$	2,644	$	7,029
Employee compensation		19,110		36,942
Income taxes		3,224		1,316
Property taxes and other		16,732		12,604
	$	41,710	$	57,891

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LONG-TERM DEBT

Long-term debt consists of:

In thousands	August 31, 2007			May 31, 2007
Senior revolving credit facility expiring in 2012	$	94,000		$	15,000
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)		—			1,135
Other		357			354
		344,357			266,489
Capital lease obligation		9,441			9,267
Less current portion		(213	)		(1,340	)
	$	353,585		$	274,416

Senior Revolving Credit Facility.On August 15, 2007, we amended and restated our June 30, 2005 credit agreement. The amended and restated credit agreement continues to provide for a $200 million senior revolving credit facility, but the credit facility is no longer secured and the principal amount may be increased by up to an additional $100 million at our option, provided that the lenders that are parties to the amended and restated credit agreement and such additional lenders as are invited by us and approved by the administrative agent provide commitments for the additional principal amount. The credit facility expires on August 15, 2012. 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 August 31, 2007, $94.0 million was outstanding under the facility and an additional $29.1 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 .75% 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 .25% on the unused portion of the facility. All of our consolidated subsidiaries have guaranteed our obligations under the credit facility. We may terminate the facility at any time.

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. We were in compliance with all of our loan covenants as of August 31, 2007.

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.

Other.Maturities of long-term debt, excluding the capital lease obligation, for each of the five succeeding years are none for 2008 through 2011 and $94.0 million for 2012. The total amount of interest paid was $10.2 million and $11.5 million during the three-month periods ended August 31, 2007 and 2006, respectively. Interest capitalized was $6.1 million and $1.8 million during the three-month periods ended August 31, 2007 and 2006, respectively.

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COMMITMENTS

During fiscal year 2006, we commenced construction on a project to expand and modernize our Oro Grande, California cement plant. We are constructing approximately 2.3 million tons of advanced dry process annual cement production capacity, and plan to 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 $344.1 million has been expended as of August 31, 2007. The new plant is expected to begin the startup and commissioning process by the end of November 2007.

On September 21, 2007, we entered into a construction contract in connection with a project to expand our Hunter, Texas cement plant. We plan to expand the Hunter plant by approximately 1.4 million tons of advanced dry process annual cement production capacity. The 900,000 tons of existing annual cement production capacity will remain in operation. We currently expect the Hunter project will cost from $325 to $350 million, excluding capitalized interest related to the project. We expect to start commissioning the new kiln system by the end of calendar year 2009.

SHAREHOLDERS’ EQUITY

Common stock consists of:

In thousands	August 31, 2007	May 31, 2007
Shares authorized	40,000	40,000
Shares outstanding	27,350	27,323
Shares reserved for stock options and other	3,306	3,334

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 August 31, 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.

STOCK-BASED COMPENSATION PLANS

The Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (the “2004 Plan”) provides that, in addition to other types of awards, non-qualified and incentive stock options to purchase Common Stock may be granted to employees and non-employee directors at market prices at date of grant. In addition, non-qualified and incentive stock options remain outstanding under our 1993 Stock Option Plan. During 2006, our Board of Directors approved the amendment of certain options to conform the “change of control” provisions in such options with the terms of our other agreements.

Options become exercisable in installments beginning one year after date of grant and expire ten years later. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. Options with graded vesting are valued as single awards and the compensation cost recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. No options were granted during the three-month periods ended August 31, 2007 and 2006.

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A summary of option transactions for the three-month period ended August 31, 2007, follows:

	Shares Under Option		Weighted-Average Option Price
Outstanding at May 31, 2007	1,483,035		$	36.31
Exercised	(25,024	)		23.93
Canceled	(3,900	)		60.21
Outstanding at August 31, 2007	1,454,111		$	36.46
Exercisable at August 31, 2007	816,054		$	26.99

The following table summarizes information about stock options outstanding as of August 31, 2007.

	Range of Exercise Prices
	$16.04 - $27.85		$31.15 - $45.86		$51.70 - $70.18
Options outstanding
Shares outstanding		628,694		413,767		411,650
Weighted-average remaining life in years		4.78		3.94		8.86
Weighted-average exercise price	$	19.16	$	38.59	$	60.73
Options exercisable
Shares exercisable		487,011		294,443		34,600
Weighted-average remaining life in years		4.55		2.56		8.38
Weighted-average exercise price	$	19.80	$	35.98	$	51.71

Outstanding options expire on various dates to January 17, 2017. We have reserved 1,839,964 shares for future awards under the 2004 Plan as of August 31, 2007.

As of August 31, 2007, the aggregate intrinsic value (the difference in the closing market price of our common stock of $73.72 and the exercise price to be paid by the optionee) of stock options outstanding was $54.2 million. The aggregate intrinsic value of exercisable stock options at that date was $38.1 million. The total intrinsic value for options exercised (the difference in the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) was $1.5 million and $900,000 for the three-month periods ended August 31, 2007 and 2006, respectively.

We have provided additional stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments and a former stock awards program. At August 31, 2007, outstanding stock appreciation rights totaled 158,645 shares, deferred compensation agreements to be settled in cash totaled 98,525 shares, deferred compensation agreements to be settled in common stock totaled 5,718 shares, unvested restricted stock payments totaled 15,169 shares and stock awards totaled 6,426 shares. Other credits included $16.1 million at August 31, 2007 and $17.9 million at May 31, 2007 representing accrued compensation which is expected to be settled in cash.

Total stock-based compensation included in selling, general and administrative expense (credit) was $(1.7) million and $600,000 in the three-month periods ended August 31, 2007 and 2006, respectively.

As of August 31, 2007, $10.7 million of total unrecognized compensation cost related to stock options, stock appreciation rights contracts, restricted stock payments and stock awards is expected to be recognized. We currently expect to recognize approximately $4.2 million of this stock-based compensation expense in 2008, $2.8 million in 2009, $2.0 million in 2010, $1.2 million in 2011, $400,000 in 2012 and thereafter an aggregate of $100,000.

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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 periods ended August 31, 2007 and 2006, was as follows:

	Pension Benefit						Health Benefit
In thousands	2007			2006			2007			2006
Service cost	$	144		$	123		$	30		$	24
Interest cost		695			681			100			92
Expected return on plan assets		(882	)		(760	)		—			—
Amortization of prior service cost		—			—			(211	)		(211	)
Amortization of net actuarial loss		55			107			164			150
	$	12		$	151		$	83		$	55

Financial Security Defined Benefit Plans.We have a series of financial security plans 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 financial security plan benefit expense charged to costs and expenses for the three-month periods ended August 31, 2007 and 2006, was as follows:

	FSP Benefit
In thousands	2007			2006
Service cost	$	743		$	572
Interest cost		474			440
Recognized actuarial loss		—			254
Participant contributions		(99	)		(87	)
	$	1,118		$	1,179

INCOME TAXES

Federal income taxes for the interim periods ended August 31, 2007 and 2006 have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible, state income taxes and deductions for income from qualified domestic production activities. Our estimated effective tax rate for 2007 is 31.4% compared to 32.0% for 2006. We received income tax refunds of $500,000 and $300,000 during the three-month periods ended August 31, 2007 and 2006, respectively.

Effective June 1, 2007, we adopted Financial Accounting Standards Board Interpretation 48, “Accounting for Uncertainty in Income Taxes.” 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 have no significant reserves for uncertain tax positions and no adjustments to such reserves were required upon adoption of this interpretation. Interest and penalties resulting from audits by tax authorities have been immaterial and are included in income tax expense in the consolidated statements of operations.

In addition to our federal income tax return, we file income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examinations by tax authorities for years prior to 2004. Our federal income tax returns for 2004 through 2006 are currently under examination. We do not anticipate that any adjustments would have a material effect on our financial position.

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LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES

We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. 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.

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, 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	August 31, 2007		May 31, 2007
Identifiable assets
Cement	$	839,714	$	775,229
Aggregates		212,651		209,614
Consumer products		114,465		102,916
Corporate		162,171		174,477
Total assets	$	1,329,001	$	1,262,236

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

	Three-months ended August 31,
In thousands	2007			2006
Net sales
Cement
Sales to external customers	$	108,798		$	116,276
Intersegment sales		20,699			21,414
Aggregates
Sales to external customers		61,181			66,914
Intersegment sales		10,682			8,981
Consumer products
Sales to external customers		93,475			88,462
Intersegment sales		1,051			1,083
Eliminations		(32,432	)		(31,478	)
Total net sales	$	263,454		$	271,652
Segment operating profit
Cement	$	17,218		$	40,134
Aggregates		11,660			12,582
Consumer products		4,077			3,641
Unallocated overhead and other income - net		(1,734	)		(1,911	)
Total segment operating profit		31,221			54,446
Corporate
Selling, general and administrative expense		(5,809	)		(7,747	)
Interest		—			(5,542	)
Other income		675			2,108
Income before income taxes	$	26,087		$	43,265
Depreciation, depletion and amortization
Cement	$	5,897		$	5,715
Aggregates		5,138			3,800
Consumer products		2,055			1,542
Corporate		228			115
Total depreciation, depletion and amortization	$	13,318		$	11,172
Capital expenditures
Cement	$	92,047		$	50,355
Aggregates		7,549			9,255
Consumer products		3,573			4,191
Corporate		423			317
Total capital expenditures	$	103,592		$	64,118
Net sales by product
Cement	$	102,723		$	109,744
Stone, sand and gravel		31,655			35,146
Ready-mix concrete		79,925			72,345
Other products		28,657			32,082
Delivery fees		20,494			22,335
Total net sales	$	263,454		$	271,652

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

Cement capital expenditures include $76.4 million and $47.7 million in the three-month periods ended August 31, 2007 and 2006, respectively, incurred in connection with the expansion and modernization of our Oro Grande, California cement plant, and $9.8 million in the three-month period ended August 31, 2007 incurred in connection with the expansion of our Hunter, Texas cement plant. Other capital expenditures incurred represent normal replacement and technological upgrades of existing equipment and acquisitions to sustain existing operations in each segment.

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 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 August 31, 2007
Cash and cash equivalents	$	1,737	$	3,428	$	—	$	—		$	5,165
Receivables - net		—		160,079		—		—			160,079
Intercompany receivables		129,694		18,755		—		(148,449	)		—
Inventories		—		112,517		—		—			112,517
Deferred income taxes and prepaid expenses		258		12,789		—		—			13,047
Total current assets		131,689		307,568		—		(148,449	)		290,808
Goodwill		—		58,395		—		—			58,395
Real estate and investments		105,908		6,309		—		—			112,217
Deferred charges and intangibles		7,688		4,343		—		—			12,031
Investment in subsidiaries		838,047		—		—		(838,047	)		—
Long-term intercompany receivables		50,000		—		—		(50,000	)		—
Property, plant and equipment – net		—		855,550		—		—			855,550
Total assets	$	1,133,332	$	1,232,165	$	—	$	(1,036,496	)	$	1,329,001
Accounts payable	$	80	$	94,436	$	—	$	—		$	94,516
Intercompany payables		18,755		129,694		—		(148,449	)		—
Accrued interest, wages and other items		7,093		34,617		—		—			41,710
Current portion of long-term debt		—		213		—		—			213
Total current liabilities		25,928		258,960		—		(148,449	)		136,439
Long-term debt		344,357		9,228		—		—			353,585
Long-term intercompany payables		—		50,000		—		(50,000	)		—
Deferred income taxes and other credits		13,470		75,930		—		—			89,400
Shareholders’ equity		749,577		838,047		—		(838,047	)		749,577
Total liabilities and shareholders’ equity	$	1,133,332	$	1,232,165	$	—	$	(1,036,496	)	$	1,329,001

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In thousands	Texas Industries, Inc.		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries			Consolidated
Condensed consolidating balance sheet at May 31, 2007
Cash and cash equivalents	$	6,095	$	9,043	$	—	$	—		$	15,138
Receivables - net		—		142,610		—		—			142,610
Intercompany receivables		50,296		18,761		—		(69,057	)		—
Inventories		—		121,467		—		—			121,467
Deferred income taxes and prepaid expenses		3,277		14,344		—		—			17,621
Total current assets		59,668		306,225		—		(69,057	)		296,836
Goodwill		—		58,395		—		—			58,395
Real estate and investments		104,980		6,434		—		—			111,414
Deferred charges and intangibles		7,180		4,189		—		—			11,369
Investment in subsidiaries		816,831		—		—		(816,831	)		—
Long-term intercompany receivables		50,000		—		—		(50,000	)		—
Property, plant and equipment – net		—		784,222		—		—			784,222
Total assets	$	1,038,659	$	1,159,465	$	—	$	(935,888	)	$	1,262,236
Accounts payable	$	77	$	109,672	$	—	$	—		$	109,749
Intercompany payables		18,761		50,296		—		(69,057	)		—
Accrued interest, wages and other items		10,457		47,434		—		—			57,891
Current portion of long-term debt		1,135		205		—		—			1,340
Total current liabilities		30,430		207,607		—		(69,057	)		168,980
Long-term debt		265,354		9,062		—		—			274,416
Long-term intercompany payables		—		50,000		—		(50,000	)		—
Deferred income taxes and other credits		14,393		75,965		—		—			90,358
Shareholders’ equity		728,482		816,831		—		(816,831	)		728,482
Total liabilities and shareholders’ equity	$	1,038,659	$	1,159,465	$	—	$	(935,888	)	$	1,262,236

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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 August 31, 2007
Net sales	$	—		$	263,454		$	—	$	—		$	263,454
Cost of products sold		—			217,437			—		—			217,437
Gross profit		—			46,017			—		—			46,017
Selling, general and administrative		254			21,929			—		—			22,183
Interest		5,866			—			—		(5,866	)		—
Other income		(26	)		(2,227	)		—		—			(2,253	)
Intercompany other income		(882	)		(4,984	)		—		5,866			—
		5,212			14,718			—		—			19,930
Income (loss) before the following items		(5,212	)		31,299			—		—			26,087
Income taxes (benefit)		(1,916	)		10,089			—		—			8,173
		(3,296	)		21,210			—		—			17,914
Equity in earnings of subsidiaries		21,210			—			—		(21,210	)		—
Net income	$	17,914		$	21,210		$	—	$	(21,210	)	$	17,914
Condensed consolidating statement of operations for the three months ended August 31, 2006
Net sales	$	—		$	271,652		$	—	$	—		$	271,652
Cost of products sold		—			205,338			—		—			205,338
Gross profit		—			66,314			—		—			66,314
Selling, general and administrative		1,502			19,556			—		—			21,058
Interest		6,412			12			—		(882	)		5,542
Other income		(1,676	)		(1,875	)		—		—			(3,551	)
Intercompany other income		(882	)		—			—		882			—
		5,356			17,693			—		—			23,049
Income (loss) before the following items		(5,356	)		48,621			—		—			43,265
Income taxes (benefit)		(2,015	)		15,849			—		—			13,834
		(3,341	)		32,772			—		—			29,431
Equity in earnings of subsidiaries		32,772			—			—		(32,772	)		—
Net income	$	29,431		$	32,772		$	—	$	(32,772	)	$	29,431

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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 three months ended August 31, 2007
Net cash provided by operating activities	$	(82,661	)	$	96,713		$	—	$	—	$	14,052
Investing activities
Capital expenditures - expansions		—			(76,361	)		—		—		(76,361	)
Capital expenditures - other		—			(27,231	)		—		—		(27,231	)
Proceeds from asset disposals		—			1,288			—		—		1,288
Purchases of short-term investments		—			—			—		—		—
Sales of short-term investments		—			—			—		—		—
Investments in life insurance contracts		(415	)		—			—		—		(415	)
Other - net		—			(24	)		—		—		(24	)
Net cash used by investing activities		(415	)		(102,328	)		—		—		(102,743	)
Financing activities
Long-term borrowings		124,000			—			—		—		124,000
Debt retirements		(46,173	)		—			—		—		(46,173	)
Debt issuance costs		(944	)		—			—		—		(944	)
Stock option exercises		599			—			—		—		599
Excess tax benefits from stock-based compensation		3,287			—			—		—		3,287
Common dividends paid		(2,051	)		—			—		—		(2,051	)
Net cash provided (used) by financing activities		78,718			—			—		—		78,718
Decrease in cash and cash equivalents		(4,358	)		(5,615	)		—		—		(9,973	)
Cash and cash equivalents at beginning of period		6,095			9,043			—		—		15,138
Cash and cash equivalents at end of period	$	1,737		$	3,428		$	—	$	—	$	5,165
Condensed consolidating statement of cash flows for the three months ended August 31, 2006
Net cash provided by operating activities	$	(23,859	)	$	59,922		$	—	$	—	$	36,063
Investing activities
Capital expenditures - expansions		—			(47,702	)		—		—		(47,702	)
Capital expenditures - other		—			(16,416	)		—		—		(16,416	)
Proceeds from asset disposals		—			987			—		—		987
Purchases of short-term investments		(8,500	)		—			—		—		(8,500	)
Sales of short-term investments		20,000			—			—		—		20,000
Investments in life insurance contracts		(2,402	)		—			—		—		(2,402	)
Other - net		—			297			—		—		297
Net cash used by investing activities		9,098			(62,834	)		—		—		(53,736	)
Financing activities
Long-term borrowings		—			—			—		—		—
Debt retirements		(1	)		—			—		—		(1	)
Debt issuance costs		—			—			—		—		—
Stock option exercises		752			—			—		—		752
Excess tax benefits from stock-based compensation		881			—			—		—		881
Common dividends paid		(1,798	)		—			—		—		(1,798	)
Net cash provided (used) by financing activities		(166	)		—			—		—		(166	)
Decrease in cash and cash equivalents		(14,927	)		(2,912	)		—		—		(17,839	)
Cash and cash equivalents at beginning of period		78,569			5,570			—		—		84,139
Cash and cash equivalents at end of period	$	63,642		$	2,658		$	—	$	—	$	66,300

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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 August 31, 2007, and the related consolidated statements of operations and cash flows for the three-month periods ended August 31, 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, 2007, 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 10, 2007, 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, 2007, 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

September 25, 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 operating information relating to our products.

	Three months ended August 31,
In thousands except per unit	2007			2006
Sales
Cement	$	123,423		$	131,157
Stone, sand and gravel		39,804			42,723
Ready-mix concrete		79,990			72,442
Other products		32,175			34,473
Interplant		(32,432	)		(31,478	)
Delivery fees		20,494			22,335
Net sales	$	263,454		$	271,652
Shipments
Cement (tons)		1,290			1,388
Stone, sand and gravel (tons)		5,551			6,461
Ready-mix concrete (cubic yards)		998			980
Prices
Cement ($/ton)	$	95.69		$	94.48
Stone, sand and gravel ($/ton)		7.17			6.61
Ready-mix concrete ($/cubic yard)		80.17			73.90
Cost of sales
Cement ($/ton)	$	79.37		$	62.97
Stone, sand and gravel ($/ton)		5.05			4.97
Ready-mix concrete ($/cubic yard)		73.90			70.11

- 22 -

Gross profit for the three-month period ended August 31, 2007 was $46.0 million, a decrease of $20.3 million from the prior year period despite improved product pricing. The decrease was primarily the result of lower cement shipments in our Texas market area due to adverse weather and higher cement production costs due to plant maintenance.

Sales.Net sales for the three-month period ended August 31, 2007 were $263.5 million, a decrease of $8.2 million from the prior year period. Total cement sales decreased $7.7 million on 1% higher average prices and 7% lower shipments. Total stone, sand and gravel sales decreased $2.9 million on 8% higher average prices and 14% lower shipments. Total ready-mix concrete sales increased $7.5 million on 8% higher average prices and 2% higher volume.

Above average rainfall in our Texas market area during the first two months of the current three-month period reduced shipments of all of our major products. Average prices for our major products have improved from the prior year period. Market conditions have continued to support the current level of pricing.

Cost of Products Sold.Cost of products sold for the three-month period ended August 31, 2007 was $217.4 million, an increase of $12.1 million from the prior year period. Cement unit costs increased 26%. Stone, sand and gravel unit costs increased 2%. Ready-mix concrete unit costs increased 5%.

Scheduled shutdowns for maintenance at our Midlothian and Hunter, Texas cement plants was the primary reason for increased cement unit costs. Stone, sand and gravel overall unit costs increased primarily as a result of reduced shipments caused by the adverse weather conditions in north Texas offset in part by lower production levels. Ready-mix concrete unit costs increased primarily as a result of higher distribution and cement and aggregate raw material costs.

Selling, General and Administrative.Selling, general and administrative expense for the three-month period ended August 31, 2007 was $22.2 million, an increase of $1.1 million from the prior year period. Operating selling, general and administrative expense for the three-month period ended August 31, 2007 was $16.4 million, an increase of $3.0 million from the prior year period. The increase was primarily the result of $1.5 million higher incentive compensation expense and $500,000 higher wages and benefits. Corporate selling, general and administrative expense for the three-month period ended August 31, 2007 was $5.8 million, a decrease of $1.9 million from the prior year period. The decrease was primarily the result of lower stock-based compensation expense.

Other Income.Other income for the three-month period ended August 31, 2007 was $2.3 million, a decrease of $1.3 million from the prior year period. Operating other income for the three-month period ended August 31, 2007 was $1.6 million, an increase of $100,000 from the prior year period. The increase was primarily the result of higher rent and royalty income. Corporate other income for the three-month period ended August 31, 2007 was $700,000, a decreased of $1.4 million from the prior year period. The decrease was primarily the result of $1.7 million lower interest income offset in part by $200,000 higher real estate income.

Interest Expense

Interest expense incurred for the three-month period ended August 31, 2007 was $6.1 million all of which was capitalized in conjunction with our Oro Grande, California cement plant expansion and modernization project. Interest expense incurred for the three-month period ended August 31, 2006 was $7.3 million, of which $1.8 million was capitalized.

Income Taxes

Federal income taxes for the interim periods ended August 31, 2007 and 2006 have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible, state income taxes and deductions for income from qualified domestic production activities. Our estimated effective tax rate for 2007 is 31.4% compared to 32.0% for 2006.

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LIQUIDITY AND CAPITAL RESOURCES

In addition to cash and cash equivalents of $5.2 million at August 31, 2007, our sources of liquidity include cash from operations, borrowings available under our $200 million senior revolving credit facility and distributions available from our investments in life insurance contracts.

Senior Revolving Credit Facility.On August 15, 2007, we amended and restated our June 30, 2005 credit agreement. The amended and restated credit agreement continues to provide for a $200 million senior revolving credit facility, but the credit facility is no longer secured and the principal amount may be increased by up to an additional $100 million at our option, provided that the lenders that are parties to the amended and restated credit agreement and such additional lenders as are invited by us and approved by the administrative agent provide commitments for the additional principal amount. The credit facility expires on August 15, 2012. 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 August 31, 2007, $94.0 million was outstanding under the facility and an additional $29.1 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 .75% 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 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.We have purchased life insurance contracts in connection with certain of our benefit plans. At August 31, 2007, these contracts had a net cash surrender value of $105.9 million, of which approximately $100 million is available for distribution 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 are constructing approximately 2.3 million tons of advanced dry process annual cement production capacity, and plan to 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 $344.1 million has been expended as of August 31, 2007. The new plant is expected to begin the startup and commissioning process by the end of November 2007.

On September 21, 2007, we entered into a construction contract in connection with a project to expand our Hunter, Texas cement plant. We plan to expand the Hunter plant by approximately 1.4 million tons of advanced dry process annual cement production capacity. The 900,000 tons of existing annual cement production capacity will remain in operation. We currently expect the Hunter project will cost from $325 to $350 million, excluding capitalized interest related to the project. We expect to start commissioning the new kiln system by the end of calendar year 2009.

We expect cash and cash equivalents, cash from operations, available borrowings under our senior revolving credit facility and available distributions from our investments in life insurance contracts to be sufficient to provide funds for capital expenditure commitments currently estimated at $200 million for fiscal year 2008 (including the expansion and modernization of our Oro Grande, California cement plant but excluding the expansion of the Hunter, Texas plant), scheduled debt payments, working capital needs and other general corporate purposes for at least the next year. We are currently reviewing alternatives for funding capital expenditures for the expansion of our Hunter, Texas cement plant.

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Cash Flows

Net cash provided by operating activities for the three-month period ended August 31, 2007 was $14.1 million compared to $36.1 million for the prior year period. The decrease resulted primarily from lower net income and changes in working capital items.

Net cash used by investing activities for the three-month period ended August 31, 2007 was $102.7 million compared to $53.7 million for the prior year period. Capital expenditures incurred in connection with the expansion and modernization of our Oro Grande, California cement plant were $76.4 million, up $28.7 million from the prior year period. Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $9.8 million in the current period. Capital expenditures for normal replacement and technological upgrades of existing equipment and acquisitions to sustain our existing operations were $17.4 million, up $1.0 million from the prior year period. In the prior year period, we decreased our investment in auction rate securities $11.5 million.

Net cash provided by financing activities for the three-month period ended August 31, 2007 was $78.7 million compared to $200,000 used in the prior year period. The increase resulted primarily from borrowings under our senior revolving credit facility and higher excess tax benefits from stock-based compensation.

OTHER ITEMS

Environmental Matters

We are subject to federal, state and local environmental laws, regulations and permits concerning, among other matters, air emissions and wastewater discharge. We intend to comply with these laws, regulations and permits. However, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in violation of certain of these laws, regulations and permits, or from private parties alleging that our operations have injured them or their property. 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.

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. We have generally not entered into any long-term contracts to satisfy our fuel and electricity needs, with the exception of coal which we purchase from specific mines pursuant to long-term contracts. However, we continually monitor these markets and we may decide in the future to enter into 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, 2007.

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New Accounting Standards.

Accounting for Uncertainty in Income Taxes.Effective June 1, 2007, we adopted Financial Accounting Standards Board Interpretation 48, “Accounting for Uncertainty in Income Taxes.” 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 have no significant reserves for uncertain tax positions and no adjustments to such reserves were required upon adoption of this interpretation. Interest and penalties resulting from audits by tax authorities have been immaterial and are included in income tax expense in the consolidated statements of operations.

Major Maintenance Activities.Effective June 1, 2007, we adopted Financial Accounting Standards Board FSP AUG AIR-1, “Accounting for Planned Major Maintenance Activities.” This FSP addresses the planned major maintenance of assets and prohibits the use of the “accrue-in-advance” method of accounting for these activities. The adoption of this FSP did not have any impact on our consolidated financial statements.

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

Certain statements contained in this quarterly report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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, 2007.

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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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The U. S. Environmental Protection Agency, or EPA, has issued a Finding and Notice of Violation, or NOV, to Riverside Cement Company, one of our subsidiaries. In the NOV, the EPA alleged the violation of several federal and state laws and regulations on certain dates between June 2002 and January 2005 involving the old cement kilns at Riverside’s Oro Grande, California plant. The alleged violations primarily include exceeding the temperature and nitrogen oxide emission limits for the cement kilns, excess visible emissions and failure to perform all required visible emission observations, inadequate description of certain procedures in an equipment operating plan, and failure to perform certain baghouse inspections and measurements. In July and August 2007 the EPA proposed settlement terms to Riverside. Based on subsequent negotiations, Riverside believes that a settlement is likely in which it will not admit the alleged violations, and it will agree to pay a civil penalty of approximately $394,000, start up its new cement kiln and shut down its old kilns on a mutually agreed schedule and implement specified baghouse inspection measures.

The other information required by this item is included in the section of the Notes to Consolidated Financial Statements entitled “Legal Proceedings and Contingent Liabilities” presented in Part I and incorporated herein by reference.

Item 5. Other Information

On September 21, 2007, TXI Operations, LP (“TXI Ops”), a wholly owned subsidiary of Texas Industries, Inc., entered into a contract (the “Construction Contract”) with Amec-Zachry Contractors (the “Contractor”), a joint venture between Zachry Construction Corporation and AMEC E&C Services, Inc. In the Construction Contract, TXI Ops engaged the Contractor to furnish, as provided in the Construction Contract, project management services, construction management, engineering, design, drawings, materials, equipment, tools, installation, labor, supervision and insurance to provide TXI Ops with a new 3,850 short tons per day clinker production line at TXI Ops’ Hunter, Texas cement plant. TXI Ops has entered into the Construction Contract in connection with the previously announced expansion of the Hunter cement plant.

A copy of the Construction Contract is attached as Exhibit 10.28 hereto and incorporated herein by reference.

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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 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)
4.3	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)
4.4	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)
4.5	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	First Amended and Restated Credit Agreement, dated August 15, 2007, 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 10.1 to Report on Form 8-K filed on August 17, 2007, File No. 001-04887)
10.3	Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (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 Steel Company (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)

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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 2008 (incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K filed on July 13, 2007)
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, 2010 (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on July 13, 2007)
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)

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10.27	Amendment No. 2 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, between Texas Industries, Inc. and Mel G. Brekhus dated July 11, 2007 (incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K filed on July 13, 2007)
10.28	Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (portions of the exhibit have been omitted pursuant to a request for confidential treatment)
12.1	Computation of Ratios of Earnings to Fixed Charges
15.1	Letter re: Unaudited Interim Financial Information
31.1	Certification of Chief Executive Officer
31.2	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.
September 27, 2007	/s/ Richard M. Fowler
	Richard M. Fowler
	Executive Vice President – Finance and Chief Financial Officer (Principal Financial Officer)
September 27, 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 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)
4.3	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)
4.4	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)
4.5	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	First Amended and Restated Credit Agreement, dated August 15, 2007, 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 10.1 to Report on Form 8-K filed on August 17, 2007, File No. 001-04887)
10.3	Separation and Distribution Agreement, dated July 6, 2005, between the Company and Chaparral Steel Company (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 Steel Company (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)

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Index to Exhibits-(Continued)

Exhibit Number
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 2008 (incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K filed on July 13, 2007)
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, 2010 (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on July 13, 2007)
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)

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Index to Exhibits-(Continued)

Exhibit Number
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)
10.27	Amendment No. 2 to SAR Agreement for Employee Directors Under Texas Industries, Inc. 2003 Stock Appreciation Rights Plan, between Texas Industries, Inc. and Mel G. Brekhus dated July 11, 2007 (incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K filed on July 13, 2007)
10.28	Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (portions of the exhibit have been omitted pursuant to a request for confidential treatment)
12.1	Computation of Ratios of Earnings to Fixed Charges
15.1	Letter re: Unaudited Interim Financial Information
31.1	Certification of Chief Executive Officer
31.2	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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