Texas Industries 10-Q 2013 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, 2012

OR

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

For the transition period from                     to                     

Commission File Number 1-4887

TEXAS INDUSTRIES, INC.

(Exact name of Registrant as specified in its Charter)

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

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

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

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

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

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

Large Accelerated Filer	x	Accelerated Filer	¨
Non-accelerated Filer	¨	Smaller Reporting Company	¨

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

There were 28,031,943 shares of the Registrant’s Common Stock, $1.00 par value, outstanding as of September 24, 2012.

INDEX

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – August 31, 2012 and May 31, 2012		3
	Consolidated Statements of Operations – three months ended August 31, 2012 and August 31, 2011		4
	Consolidated Statements of Comprehensive Loss – three months ended August 31, 2012 and August 31, 2011		5
	Consolidated Statements of Cash Flows – three months ended August 31, 2012 and August 31, 2011		6
	Notes to Consolidated Financial Statements		7
	Report of Independent Registered Public Accounting Firm		26
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 4.	Controls and Procedures		35
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 4.	Mine Safety Disclosures		36
Item 6.	Exhibits		37
SIGNATURES			39

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

In thousands	(Unaudited) August 31, 2012			May 31, 2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	60,871		$	88,027
Receivables – net		113,354			98,836
Inventories		118,370			129,514
Deferred income taxes and prepaid expenses		17,640			19,007
TOTAL CURRENT ASSETS		310,235			335,384
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements		173,771			172,247
Buildings		51,749			51,982
Machinery and equipment		1,189,805			1,184,651
Construction in progress		454,392			437,166
		1,869,717			1,846,046
Less depreciation and depletion		662,385			650,450
		1,207,332			1,195,596
OTHER ASSETS
Goodwill		1,715			1,715
Real estate and investments		20,716			20,865
Deferred income taxes and other charges		24,400			23,368
		46,831			45,948
	$	1,564,398		$	1,576,928
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	68,673		$	64,825
Accrued interest, compensation and other		44,656			61,317
Current portion of long-term debt		1,455			1,214
TOTAL CURRENT LIABILITIES		114,784			127,356
LONG-TERM DEBT		657,803			656,949
OTHER CREDITS		95,935			96,352
SHAREHOLDERS’ EQUITY
Common stock, $1 par value; authorized 100,000 shares; issued and outstanding 28,031 and 27,996 shares, respectively		28,031			27,996
Additional paid-in capital		490,495			488,637
Retained earnings		201,480			204,136
Accumulated other comprehensive loss		(24,130	)		(24,498	)
		695,876			696,271
	$	1,564,398		$	1,576,928

See notes to consolidated financial statements.

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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended August 31,
In thousands except per share	2012			2011
NET SALES	$	191,808		$	181,740
Cost of products sold		171,717			167,915
GROSS PROFIT		20,091			13,825
Selling, general and administrative		18,879			17,804
Interest		7,777			9,460
Other income		(4,052	)		(5,872	)
		22,604			21,392
LOSS BEFORE INCOME TAXES		(2,513	)		(7,567	)
Income taxes (benefit)		143			(147	)
NET LOSS	$	(2,656	)	$	(7,420	)
Net loss per share
Basic	$	(.09	)	$	(.27	)
Diluted	$	(.09	)	$	(.27	)
Average shares outstanding
Basic		27,998			27,874
Diluted		27,998			27,874
Cash dividends declared per share	$	—		$	.075

See notes to consolidated financial statements.

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(Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended August 31,
In thousands	2012			2011
Net loss	$	(2,656	)	$	(7,420	)
Other comprehensive income
Net actuarial gains (losses) of defined postretirement benefit plans
Reclassification of recognized transactions, net of tax		546			363
Adjustment, net of tax		(55	)		—
Prior service cost of defined postretirement benefit plans
Reclassification of recognized transactions, net of taxes		(123	)		(123	)
Total other comprehensive income		368			240
Comprehensive loss	$	(2,288	)	$	(7,180	)

See notes to consolidated financial statements.

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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

	Three months ended August 31,
In thousands	2012			2011
OPERATING ACTIVITIES
Net loss	$	(2,656	)	$	(7,420	)
Adjustments to reconcile net loss to cash provided by operating activities
Depreciation, depletion and amortization		14,216			15,980
Gains on asset disposals		(2,503	)		(2,368	)
Deferred income tax benefit		(3	)		(241	)
Stock-based compensation expense		2,766			107
Other – net		(3,028	)		(1,567	)
Changes in operating assets and liabilities
Receivables – net		(14,013	)		(8,670	)
Inventories		10,846			894
Prepaid expenses		1,099			1,729
Accounts payable and accrued liabilities		(4,632	)		(5,809	)
Net cash provided (used) by operating activities		2,092			(7,365	)
INVESTING ACTIVITIES
Capital expenditures – expansions		(28,114	)		(25,221	)
Capital expenditures – other		(4,496	)		(20,367	)
Proceeds from asset disposals		3,578			863
Investments in life insurance contracts		146			—
Other – net		(59	)		(82	)
Net cash used by investing activities		(28,945	)		(44,807	)
FINANCING ACTIVITIES
Debt retirements		(1,028	)		(18	)
Debt issuance costs		—			(1,629	)
Stock option exercises		725			78
Common dividends paid		—			(2,091	)
Net cash used by financing activities		(303	)		(3,660	)
Decrease in cash and cash equivalents		(27,156	)		(55,832	)
Cash and cash equivalents at beginning of period		88,027			116,432
Cash and cash equivalents at end of period	$	60,871		$	60,600

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

1. Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended August 31, 2012, are not necessarily indicative of the results that may be expected for the year ended May 31, 2013. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Texas Industries, Inc. for the year ended May 31, 2012.

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

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

Fair Value of Financial Instruments. The estimated fair value of each class of financial instrument as of August 31, 2012 and May 31, 2012 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices. As of August 31, 2012, the fair value of our long-term debt, including the current portion, was approximately $698.3 million compared to the carrying amount of $659.3 million. As of May 31, 2012, the fair value of our long-term debt, including the current portion, was approximately $646.8 million compared to the carrying amount of $658.2 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and would record a valuation allowance unless such deferred tax assets were deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets is dependent upon various factors including the generation of taxable income during future periods. In determining the need for a valuation allowance, we consider such factors as historical earnings, the reversal of existing temporary differences, prior taxable income (if carryback is permitted under the tax law), and prudent and feasible tax planning strategies. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination. If we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to earnings at such time. See further discussion in note 8.

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

Investments include life insurance contracts purchased in connection with certain of our benefit plans. The contracts, recorded at their net cash surrender value, totaled $0.3 million (net of distributions of $93.7 million plus accrued interest and fees) at August 31, 2012 and $0.7 million (net of distributions of $94.4 million plus accrued interest and fees) at May 31, 2012. We can elect to receive distributions chargeable against the cash surrender value of the policies in the form of borrowings or withdrawals or we can elect to surrender the policies and receive their net cash surrender value.

Investment in Joint Venture.In November 2011 we entered into a joint venture agreement with a ready-mix operator based in Waco, Texas. We contributed certain of our central Texas ready-mix plants and related assets to the joint venture in return for a 40% equity interest. The joint venture operates ready-mix and sand and gravel plants serving the central Texas market. The day to day business operations are managed by the 60% partner in the venture. We supply cement to the joint venture. The debt of the joint venture is secured by the underlying assets of the joint venture. In addition, we have guaranteed 50% and our partner has guaranteed 100% of the debt of the joint venture. Our investment totaled $13.1 million at August 31, 2012 and $12.5 million at May 31, 2012. Our equity in income of the joint venture was $0.6 million for the three-month period ended August 31, 2012.

Deferred Other Charges. Deferred other charges totaled $21.3 million at August 31, 2012 and $20.4 million at May 31, 2012 and are composed primarily of debt issuance costs that totaled $12.5 million at August 31, 2012 and $13.0 million at May 31, 2012. The costs are amortized over the term of the related debt.

Other Credits.Other credits totaled $95.9 million at August 31, 2012 and $96.4 million at May 31, 2012 and are composed primarily of liabilities related to our retirement plans, deferred compensation agreements and asset retirement obligations.

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

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

Changes in asset retirement obligations are as follows:

	Three months ended August 31,
In thousands	2012			2011
Balance at beginning of period	$	3,879		$	4,455
Additions		45			287
Accretion expense		42			43
Settlements		(1,617	)		(328	)
Balance at end of period	$	2,349		$	4,457

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 $24.1 million (net of tax of $5.8 million) at August 31, 2012 and $24.5 million (net of tax of $6.0 million) at May 31, 2012.

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

Other Income.Routine sales of surplus operating assets and real estate resulted in gains of $2.5 million and $0.3 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively. In addition, we sold emissions credits associated with our Crestmore cement plant in Riverside, California resulting in a gain of $2.5 million in the three-month period ended August 31, 2011.

In July 2011 we entered into an asset exchange transaction with CEMEX USA in which we acquired three ready-mix concrete plants and a sand and gravel plant that serve the Austin, Texas metropolitan market. In exchange, we transferred to CEMEX USA seven ready-mix concrete plants in the Houston, Texas market, and we designated four non-operating ready-mix plant sites in the Houston area as surplus real estate. The exchange resulted in the acquisition of ready-mix and aggregate property, plant and equipment of $6.1 million and the recognition of a gain of $2.1 million in the three-month period ended August 31, 2011. The gain from the transaction and the operating results of the acquired ready-mix operations are reported in our consumer products segment, and the operating results of the acquired sand and gravel operations are reported in our aggregates segment.

Stock-based Compensation.We have provided stock-based compensation to employees and non-employee directors in the form of non-qualified and incentive stock options, restricted stock, stock appreciation rights, deferred compensation agreements and stock awards. 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. A liability, which is included in other credits, is recorded for stock appreciation rights, deferred compensation agreements and stock awards expected to be settled in cash, based on their fair value at the end of each period until such awards are paid. See further discussion in note 6.

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

Basic weighted-average number of common shares outstanding during the period includes contingently issuable shares and excludes outstanding unvested restricted shares. Contingently issuable shares outstanding at August 31, 2012 relate to deferred compensation agreements in which directors elected to defer their fees. The deferred compensation is denominated in shares of our common stock and issued in accordance with the terms of the agreement subsequent to retirement or separation from us. The shares are considered contingently issuable because the director has an unconditional right to the shares to be issued.

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

Basic and Diluted EPS are calculated as follows:

	Three months ended August 31,
In thousands except per share	2012			2011
Earnings
Net loss	$	(2,656	)	$	(7,420	)
Unvested restricted share participation		2			5
Loss allocated to common shareholders	$	(2,654	)	$	(7,415	)
Shares
Weighted-average shares outstanding		28,013			27,888
Contingently issuable shares		3			2
Unvested restricted shares		(18	)		(16	)
Basic weighted-average shares		27,998			27,874
Stock option, restricted share and award dilution		—			—
Diluted weighted-average shares (1)		27,998			27,874
Net loss per share
Basic	$	(.09	)	$	(.27	)
Diluted	$	(.09	)	$	(.27	)
(1)    Shares excluded due to antidilutive effect Stock options, restricted shares and awards		1,131			1,205

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

2. Working Capital

Working capital totaled $195.5 million at August 31, 2012 compared to $208.0 million at May 31, 2012. Selected components of working capital are summarized below.

Receivables consist of:

	August 31,		May 31,
In thousands	2012		2012
Trade notes and accounts receivable	$	112,529	$	97,621
Other		825		1,215
	$	113,354	$	98,836

Trade notes and accounts receivable are presented net of allowances for doubtful receivables of $2.6 million at August 31, 2012 and $2.5 million at May 31, 2012. Provisions for bad debts charged to expense were $0.1 million and $0.2 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively. Uncollectible accounts written off totaled less than $0.1 million and $0.2 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively.

Inventories consist of:

	August 31,		May 31,
In thousands	2012		2012
Finished products	$	6,138	$	7,749
Work in process		31,543		37,301
Raw materials		12,765		12,745
Total inventories at LIFO cost		50,446		57,795
Finished products		20,222		23,451
Raw materials		368		229
Parts and supplies		47,334		48,039
Total inventories at average cost		67,924		71,719
Total inventories	$	118,370	$	129,514

All inventories are stated at the lower of cost or market. Finished products, work in process and raw material inventories, excluding natural aggregate inventories, are valued using the last-in, first-out (“LIFO”) method. Natural aggregate finished products and raw material inventories and parts and supplies inventories are valued using the average cost method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation. If the average cost method (which approximates current replacement cost) had been used for all of these inventories, inventory values would have been higher by $36.9 million at August 31, 2012 and $37.5 million at May 31, 2012.

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Accrued interest, compensation and other consist of:

	August 31,		May 31,
In thousands	2012		2012
Interest	$	2,769	$	17,810
Compensation and employee benefits		11,963		18,103
Casualty insurance claims		14,837		14,004
Income taxes		4,646		4,500
Property taxes and other		10,441		6,900
	$	44,656	$	61,317

3. Long-Term Debt

Long-term debt consists of:

	August 31,		May 31,
In thousands	2012		2012
Senior secured revolving credit facility expiring in 2016	$	—	$	—
9.25% Senior notes due 2020 issued August 10, 2010 at par value		650,000		650,000
Other		6,897		5,778
		656,897		655,778
Capital lease obligations		2,116		2,136
Other contract obligations		245		249
		659,258		658,163
Less current portion		1,455		1,214
	$	657,803	$	656,949

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

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

The borrowing base under the agreement was $155.3 million as of August 31, 2012. We are not required to maintain any financial ratios or covenants unless an event of default occurs or the unused portion of the borrowing base is less than $25 million, in which case we must maintain a fixed charge coverage ratio of at least 1.0 to 1.0. At August 31, 2012, our fixed charge coverage ratio was (.15) to 1.0. Given this ratio, we may use only $130.3 million of the borrowing base as of such date. No borrowings were outstanding at August 31, 2012; however, $28.6 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of August 31, 2012 was $101.7 million.

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

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The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.0 to 1.0 and borrowing availability under the borrowing base is more than $40 million. When our fixed charge coverage ratio is less than 1.0 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of August 31, 2012.

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

At August 31, 2012, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

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

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

All of our consolidated subsidiaries have unconditionally guaranteed the 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of August 31, 2012.

Other.Principal payments due on long-term debt, excluding capital lease and other contract obligations, during each of the five years subsequent to August 31, 2012 are $1.5 million, $1.5 million, $1.6 million, $1.7 million and $1.2 million. The total amount of interest incurred was $17.1 million and $17.3 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively, of which $9.3 million and $7.8 million was capitalized. The total amount of interest paid in cash was $30.5 million and $30.6 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively.

Guarantee of Joint Venture Debt.We have guaranteed 50%, or $12.7 million, of an unconsolidated joint venture’s debt which matures November 18, 2013. The joint venture was in compliance with all the terms of the debt as of August 31, 2012. See further discussion of the joint venture underInvestment in Joint Venture in note 1.

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4. Commitments

During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that cement demand levels in Texas at that time would permit the new kiln to operate profitably if the project was completed as originally scheduled. We resumed construction in October 2010 and expect to begin commissioning in the fall of 2012. The total capital cost of the project is expected to be between $365 million and $375 million, excluding capitalized interest. As of August 31, 2012, we have incurred $363.5 million, excluding capitalized interest of $78.0 million related to the project, of which $354.1 million has been paid.

5. Shareholders’ Equity

There are authorized 100,000 shares of Cumulative Preferred Stock, no par value, of which 20,000 shares are designated $5 Cumulative Preferred Stock (Voting), redeemable at $105 per share and entitled to $100 per share upon dissolution. An additional 40,000 shares are designated Series B Junior Participating Preferred Stock. The Series B Preferred Stock is not redeemable and ranks, with respect to the payment of dividends and the distribution of assets, junior to (i) all other series of the Preferred Stock unless the terms of any other series shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. No shares of $5 Cumulative Preferred Stock or Series B Junior Participating Preferred Stock were outstanding as of August 31, 2012.

6. 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.

Options become exercisable in installments beginning one year after the date of grant and expire ten years after the date of grant. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. Options with graded vesting are valued as single awards and the compensation cost recognized using a straight-line attribution method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. No options were granted during the three-month period ended August 31, 2012. The following table sets forth the information about the weighted-average grant date fair value of options granted during the three-month period ended August 31, 2011 and the weighted-average assumptions used for such grants.

	Three months ended August 31,
	2011
Weighted average grant date fair value	$	20.22
Weighted average assumptions used:
Expected volatility		.411
Expected option term in years		10
Risk-free interest rate		3.17	%
Expected dividend yield		.75	%

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

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A summary of option transactions for the three-month period ended August 31, 2012, follows:

	Shares Under Option			Weighted-Average Option Price
Outstanding at May 31, 2012		2,145,570		$	38.54
Exercised		(41,239	)		23.93
Canceled		(15,110	)		50.86
Outstanding at August 31, 2012		2,089,221		$	38.74
Exercisable at August 31, 2012		1,113,431		$	43.14

The following table summarizes information about stock options outstanding as of August 31, 2012.

	Range of Exercise Prices
	$16.04 - $29.38		$33.57 - $48.60		$50.63 - $70.18
Options outstanding
Shares outstanding		783,224		789,797		516,200
Weighted-average remaining life in years		6.58		6.42		3.87
Weighted-average exercise price	$	25.50	$	39.70	$	57.37
Options exercisable
Shares exercisable		289,194		343,747		480,490
Weighted-average remaining life in years		3.39		4.90		3.82
Weighted-average exercise price	$	21.05	$	41.14	$	57.87

Outstanding options expire on various dates to January 11, 2022. As of August 31, 2012, there were 356,375 shares available for future awards under the 2004 Plan.

As of August 31, 2012, the aggregate intrinsic value (the difference in the closing market price of our common stock of $38.96 and the exercise price to be paid by the optionee) of stock options outstanding was $8.0 million. The aggregate intrinsic value of exercisable stock options at that date was $5.5 million. The total intrinsic value for options exercised (the difference in the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) was $0.7 million and $0.1 million for the three-month periods ended August 31, 2012 and August 31, 2011, 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 which was settled during fiscal year 2012. At August 31, 2012, outstanding stock appreciation rights totaled 133,315 shares, deferred compensation agreements to be settled in cash totaled 101,790 shares, deferred compensation agreements to be settled in common stock totaled 2,995 shares and unvested restricted stock payments totaled 18,334 shares. Other credits include $5.7 million at August 31, 2012 and $4.1 million at May 31, 2012 representing accrued stock-based compensation which is accounted for as liabilities and expected to be settled in cash. Common stock totaling 2.4 million shares at August 31, 2012 and 2.5 million shares at May 31, 2012 have been reserved for the settlement of stock-based compensation.

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Total stock-based compensation included in selling, general and administrative expense was $2.8 million and $0.1 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively. The impact of changes in our company’s stock price on stock-based awards accounted for as liabilities increased stock-based compensation $1.6 million in the three-month period ended August 31, 2012 and reduced stock-based compensation $1.2 million in the three-month period ended August 31, 2011.

Total tax expense or benefit recognized in our statements of operations for stock-based compensation was an expense of less than $0.1 million in each of the three-month periods ended August 31, 2012 and August 31, 2011. No cash tax benefit was realized for stock-based compensation in the three-month periods ended August 31, 2012 and August 31, 2011.

As of August 31, 2012, the total unrecognized stock-based compensation expense was $10.7 million. We currently expect to recognize in the years succeeding August 31, 2012 approximately $3.9 million of this stock-based compensation expense in 2013, $3.1 million in 2014, $2.2 million in 2015, $1.2 million in 2016 and $0.3 million in 2017.

7. Retirement Plans

Riverside Defined Benefit Plans.Approximately 600 employees and retirees of our subsidiary, Riverside Cement Company, are covered by a defined benefit pension plan and a postretirement health benefit plan. Unrecognized prior service costs and actuarial gains or losses for these plans are recognized in a systematic manner over the remaining service periods of active employees expected to receive benefits under these plans. The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and expenses for the three-month periods ended August 31, 2012 and August 31, 2011, was as follows:

	Three months ended August  31,
In thousands	2012			2011
Defined benefit pension plan
Service cost	$	155		$	134
Interest cost		708			760
Expected return on plan assets		(748	)		(777	)
Amortization of net actuarial loss		732			431
	$	847		$	548
Postretirement health benefit plan
Service cost	$	27		$	25
Interest cost		88			104
Amortization of prior service cost		(194	)		(194	)
Amortization of net actuarial loss		129			141
	$	50		$	76

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

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Financial Security Defined Benefit Plans.Substantially all of our executive and certain managerial emloyees are covered by a series of financial security plans that are non-qualified defined benefit plans. The financial security plans require deferral of a portion of a participant’s salary and provide retirement, death and disability benefits to participants. The financial security plans are unfunded and benefits are paid as they become due. Actuarial gains or losses are recognized when incurred. The amount of financial security plan benefit expense charged to costs and expenses for the three-month periods ended August 31, 2012 and August 31, 2011, was as follows:

	Three months ended August  31,
In thousands	2012		2011
Service cost	$	593	$	537
Interest cost		591		629
	$	1,184	$	1,166

8. Income Taxes

Income taxes for the interim periods ended August 31, 2012 and August 31, 2011 have been included in the accompanying financial statements on the basis of an estimated annual rate. The tax rate differs from the 35% federal statutory corporate rate primarily due to percentage depletion that is tax deductible, state income taxes and valuation allowances against deferred tax assets. The estimated annualized rate is (5.9)% for fiscal year 2013 compared to 1.8% for fiscal year 2012. We made no income tax payments in the three-month periods ended August 31, 2012 and August 31, 2011. We received income tax refunds of less than $0.1 million in the three-month period ended August 31, 2011.

Net deferred tax assets totaled $13.5 million at August 31, 2012 and $13.7 million at May 31, 2012, of which $10.4 million at August 31, 2012 and $10.7 million at May 31, 2012 were classified as current. Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and records a valuation allowance unless such deferred tax assets are deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets depends upon various factors including the generation of taxable income during future periods. The Company’s deferred tax assets exceeded deferred tax liabilities as of August 31, 2012 and May 31, 2012 primarily as a result of recent losses. Management has concluded that the sources of taxable income we are permitted to consider do not assure the realization of the entire amount of our net deferred tax assets. Accordingly, a valuation allowance is required due to the uncertainty of realizing the deferred tax assets. We recorded a valuation allowance of $5.2 million in fiscal year 2012 through a charge to other comprehensive loss given the increase in actuarial losses in our retirement plans in 2012. We will continue to record additional valuation allowance against additions to our net deferred tax assets for fiscal year 2013 until Management’s assurance for the realization of its deferred tax assets are deemed more likely than not to be recoverable.

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

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

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9. Legal Proceedings and Contingent Liabilities

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

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

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

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

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

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

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

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

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

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

10. 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 lightweight aggregates. Through the consumer products segment we produce and sell ready-mix concrete as our principal product. We account for intersegment sales at market prices. Segment operating profit consists of net sales less operating costs and expenses. Corporate includes those administrative, financial, legal, human resources, environmental and real estate activities which are not allocated to operations and are excluded from segment operating profit. Identifiable assets by segment are those assets that are used in each segment’s operation. Corporate assets consist primarily of cash and cash equivalents, real estate and other financial assets not identified with a business segment.

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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	2012			2011
Net sales
Cement
Sales to external customers	$	87,127		$	72,058
Intersegment sales		10,078			13,579
Aggregates
Sales to external customers		52,685			39,501
Intersegment sales		5,989			5,600
Consumer products
Sales to external customers		51,996			70,181
Intersegment sales		49			843
Eliminations		(16,116	)		(20,022	)
Total net sales	$	191,808		$	181,740
Segment operating profit (loss)
Cement	$	8,422		$	6,517
Aggregates		9,019			3,915
Consumer products		(1,908	)		(2,340	)
Total segment operating profit		15,533			8,092
Corporate		(10,269	)		(6,199	)
Interest		(7,777	)		(9,460	)
Loss before income taxes	$	(2,513	)	$	(7,567	)
Depreciation, depletion and amortization
Cement	$	8,464		$	8,927
Aggregates		3,669			4,195
Consumer products		1,866			2,564
Corporate		217			294
Total depreciation, depletion and amortization	$	14,216		$	15,980
Capital expenditures
Cement	$	29,733		$	25,696
Aggregates		608			18,305
Consumer products		1,895			1,431
Corporate		374			156
Total capital expenditures	$	32,610		$	45,588
Net sales by product
Cement	$	77,235		$	62,399
Stone, sand and gravel		22,569			17,275
Ready-mix concrete		51,870			56,223
Other products		15,863			25,615
Delivery fees		24,271			20,228
Total net sales	$	191,808		$	181,740

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 includes a gain of $2.5 million in the three-month period ended August 31, 2011 from the sale of emission credits associated with our Crestmore cement plant in Riverside, California.

Consumer products operating profit includes a gain of $2.1 million in the three-month period ended August 31, 2011 from the exchange of certain ready-mix operations in Houston, Texas for ready-mix and aggregate operations that serve the Austin, Texas metropolitan market.

Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $28.1 million and $25.2 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively, of which $18.4 million and $15.5 million was capitalized interest paid in the three-month periods ended August 31, 2012 and August 31, 2011, respectively. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain existing operations were $4.5 million and $20.4 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively, of which $18.0 million was incurred to acquire aggregate reserves in the three-month period ended August 31, 2011.

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

In thousands	August 31, 2012		May 31, 2012
Identifiable assets
Cement	$	1,145,936	$	1,135,336
Aggregates		215,671		219,074
Consumer products		97,648		90,717
Corporate		105,143		131,801
Total assets	$	1,564,398	$	1,576,928

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

11. Condensed Consolidating Financial Information

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

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

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In thousands	Texas Industries, Inc.		Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Condensed consolidating balance sheet at August 31, 2012
Cash and cash equivalents	$	52,994	$	7,877	$	—		$	60,871
Receivables – net		—		113,354		—			113,354
Inventories		—		118,370		—			118,370
Deferred income taxes and prepaid expenses		255		17,654		(269	)		17,640
Total current assets		53,249		257,255		(269	)		310,235
Property, plant and equipment – net		—		1,207,332		—			1,207,332
Goodwill		—		1,715		—			1,715
Real estate and investments		272		20,444		—			20,716
Deferred income taxes and other charges		123,194		8,759		(107,553	)		24,400
Investment in subsidiaries		1,003,734		—		(1,003,734	)		—
Long-term intercompany receivables		248,568		18,740		(267,308	)		—
Total assets	$	1,429,017	$	1,514,245	$	(1,378,864	)	$	1,564,398
Accounts payable	$	84	$	68,589	$	—		$	68,673
Accrued interest, compensation and other		11,127		33,798		(269	)		44,656
Current portion of long-term debt		—		1,455		—			1,455
Total current liabilities		11,211		103,842		(269	)		114,784
Long-term debt		650,245		7,558		—			657,803
Long-term intercompany payables		18,740		248,568		(267,308	)		—
Deferred income taxes		—		107,553		(107,553	)		—
Other credits		52,945		42,990		—			95,935
Shareholders’ equity		695,876		1,003,734		(1,003,734	)		695,876
Total liabilities and shareholders’ equity	$	1,429,017	$	1,514,245	$	(1,378,864	)	$	1,564,398

In thousands	Texas Industries, Inc.		Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Condensed consolidating balance sheet at May 31, 2012
Cash and cash equivalents	$	84,713	$	3,314	$	—		$	88,027
Receivables – net		—		98,836		—			98,836
Inventories		—		129,514		—			129,514
Deferred income taxes and prepaid expenses		99		18,908		—			19,007
Total current assets		84,812		250,572		—			335,384
Property, plant and equipment – net		—		1,195,596		—			1,195,596
Goodwill		—		1,715		—			1,715
Real estate and investments		664		20,201		—			20,865
Deferred income taxes and other charges		123,734		7,356		(107,722	)		23,368
Investment in subsidiaries		987,519		—		(987,519	)		—
Long-term intercompany receivables		246,298		18,747		(265,045	)		—
Total assets	$	1,443,027	$	1,494,187	$	(1,360,286	)	$	1,576,928
Accounts payable	$	108	$	64,717	$	—		$	64,825
Accrued interest, compensation and other		25,829		35,488		—			61,317
Current portion of long-term debt		4		1,210		—			1,214
Total current liabilities		25,941		101,415		—			127,356
Long-term debt		650,245		6,704		—			656,949
Long-term intercompany payables		18,747		246,298		(265,045	)		—
Deferred income taxes		—		107,722		(107,722	)		—
Other credits		51,823		44,529		—			96,352
Shareholders’ equity		696,271		987,519		(987,519	)		696,271
Total liabilities and shareholders’ equity	$	1,443,027	$	1,494,187	$	(1,360,286	)	$	1,576,928

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In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Condensed consolidating statement of comprehensive income for the three months ended August 31, 2012
Net sales	$	—		$	191,808		$	—		$	191,808
Cost of products sold		—			171,717			—			171,717
Gross profit (loss)		—			20,091			—			20,091
Selling, general and administrative		2,354			16,525			—			18,879
Interest		16,988			—			(9,211	)		7,777
Other income		(23	)		(4,029	)		—			(4,052	)
Intercompany other income		(882	)		(8,329	)		9,211			—
		18,437			4,167			—			22,604
Income (loss) before the following items		(18,437	)		15,924			—			(2,513	)
Income taxes (benefit)		67			76			—			143
		(18,504	)		15,848			—			(2,656	)
Equity in earnings of subsidiaries		15,848			—			(15,848	)		—
Net income (loss)	$	(2,656	)	$	15,848		$	(15,848	)	$	(2,656	)
Comprehensive loss	$	(2,288	)	$	16,216		$	(16,216	)	$	(2,288	)

In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Condensed consolidating statement of comprehensive income for the three months ended August 31, 2011
Net sales	$	—		$	181,740		$	—		$	181,740
Cost of products sold		—			167,915			—			167,915
Gross profit		—			13,825			—			13,825
Selling, general and administrative		1,025			16,779			—			17,804
Interest		17,257			—			(7,797	)		9,460
Other income		(13	)		(5,859	)		—			(5,872	)
Intercompany other income		(882	)		(6,915	)		7,797			—
		17,387			4,005			—			21,392
Income (loss) before the following items		(17,387	)		9,820			—			(7,567	)
Income taxes (benefit)		(2,130	)		1,983			—			(147	)
		(15,257	)		7,837			—			(7,420	)
Equity in earnings of subsidiaries		7,837			—			(7,837	)		—
Net income (loss)	$	(7,420	)	$	7,837		$	(7,837	)	$	(7,420	)
Comprehensive loss	$	(7,180	)	$	8,077		$	(8,077	)	$	(7,180	)

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In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Condensed consolidating statement of cash flows for the three months ended August 31, 2012
Net cash provided (used) by operating activities	$	(30,309	)	$	32,401		$	—	$	2,092
Investing activities
Capital expenditures – expansions		—			(28,114	)		—		(28,114	)
Capital expenditures – other		—			(4,496	)		—		(4,496	)
Proceeds from asset disposals		—			3,578			—		3,578
Investments in life insurance contracts		146			—			—		146
Other – net		—			(59	)		—		(59	)
Net cash provided (used) by investing activities		146			(29,091	)		—		(28,945	)
Financing activities
Long-term borrowings		—			—			—		—
Debt retirements		(4	)		(1,024	)		—		(1,028	)
Debt issuance costs		—			—			—		—
Stock option exercises		725			—			—		725
Common dividends paid		—			—			—		—
Net intercompany financing activities		(2,277	)		2,277			—		—
Net cash provided (used) by financing activities		(1,556	)		1,253			—		(303	)
Increase (decrease) in cash and cash equivalents		(31,719	)		4,563			—		(27,156	)
Cash and cash equivalents at beginning of period		84,713			3,314			—		88,027
Cash and cash equivalents at end of period	$	52,994		$	7,877		$	—	$	60,871
In thousands	Texas Industries, Inc.			Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Condensed consolidating statement of cash flows for the three months ended August 31, 2011
Net cash provided (used) by operating activities	$	(30,424	)	$	23,059		$	—	$	(7,365	)
Investing activities
Capital expenditures – expansions		—			(25,221	)		—		(25,221	)
Capital expenditures – other		—			(20,367	)		—		(20,367	)
Proceeds from asset disposals		—			863			—		863
Investments in life insurance contracts		—			—			—		—
Other – net		—			(82	)		—		(82	)
Net cash provided (used) by investing activities		—			(44,807	)		—		(44,807	)
Financing activities
Long-term borrowings		—			—			—		—
Debt retirements		—			(18	)		—		(18	)
Debt issuance costs		(1,629	)		—			—		(1,629	)
Stock option exercises		78			—			—		78
Common dividends paid		(2,091	)		—			—		(2,091	)
Net intercompany financing activities		(21,689	)		21,689			—		—
Net cash provided (used) by financing activities		(25,331	)		21,671			—		(3,660	)
Increase (decrease) in cash and cash equivalents		(55,755	)		(77	)		—		(55,832	)
Cash and cash equivalents at beginning of period		113,898			2,534			—		116,432
Cash and cash equivalents at end of period	$	58,143		$	2,457		$	—	$	60,600

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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, 2012, and the related consolidated statements of operations, comprehensive loss and cash flows for the three-month periods ended August 31, 2012 and 2011. These financial statements are the responsibility of the Company’s management.

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

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2012, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended [not presented herein], and in our report dated July 17, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of May 31, 2012, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Fort Worth, Texas

September 28, 2012

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

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

RESULTS OF OPERATIONS

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

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

During the three-month period ended August 31, 2012, while construction activity remained at low levels in both our California and Texas market areas, it has begun to show a positive trend. We have continued to focus on cost reduction, management of our cash position and management of production levels, which we believe has had a significant positive impact on our operating results.

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

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

Consolidated net sales for the three-month period ended August 31, 2012 were $191.8 million, an increase of $10.1 million from the prior year period. Consolidated cost of products sold for the three-month period ended August 31, 2012 was $171.7 million, an increase of $3.8 million from the prior year period. Sales decreased $20.4 million and cost of products sold decreased $19.4 million due to the net effect of the exit from the Houston, Texas ready-mix market in July 2011 and the sale of Texas-based package products operations in April 2012. Sales, excluding these effects, increased $30.5 million primarily due to higher shipments for all major products and higher aggregates and ready-mix concrete average prices. Cost of products sold, excluding these effects, increased $23.2 million primarily due to higher shipments. Consolidated gross profit for the three-month periods ended August 31, 2012 and August 31, 2011 was $20.1 million and $13.8 million, respectively.

Consolidated selling, general and administrative expense for the three-month period ended August 31, 2012 was $18.9 million, an increase of $1.1 million from the prior year period. Controllable expenses decreased $0.6 million from the prior year period. Expenses decreased $0.9 million from the prior year period due to the sale or our Texas-based package products operations in April 2012. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on their fair value at the end of each period until the awards are paid. The impact of changes in our stock price on the fair value of these awards increased expense $2.8 million from the prior year period.

Consolidated other income for the three-month period ended August 31, 2012 was $4.1 million, a decrease of $1.8 million from the prior year period. Routine sales of surplus operating assets and real estate resulted in gains of $2.5 million and $0.3 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively. The July 2011 asset exchange resulted in the recognition of a gain of $2.1 million in the three-month period ended August 31, 2011. The sales of emission credits associated with our Crestmore cement plant in Riverside, California resulted in gains of $2.5 million in the three-month period ended August 31, 2011. In addition, other income includes earnings from a joint venture of $0.6 million in the three-month period ended August 31, 2012.

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Total segment operating profit for the three-month periods ended August 31, 2012 and August 31, 2011 was $15.5 million and $8.1 million, respectively. The following is a summary of operating results for our business segments and certain other information related to our principal products and non-operating income and expenses.

Cement Operations

	Three months ended August 31,
In thousands except per unit	2012			2011
Operating Results
Cement sales	$	87,313		$	75,978
Other sales and delivery fees		9,892			9,659
Total segment sales		97,205			85,637
Cost of products sold		86,119			78,232
Gross profit		11,086			7,405
Selling, general and administrative		(3,544	)		(4,078	)
Other income		880			3,190
Operating Profits	$	8,422		$	6,517
Cement
Shipments (tons)		1,119			969
Prices ($/ton)	$	78.06		$	78.41
Cost of sales ($/ton)	$	68.55		$	71.77

Cement operating profit for the three-month periods ended August 31, 2012 and August 31, 2011 was $8.4 million and $6.5 million, respectively.

Total segment sales for the three-month period ended August 31, 2012 were $97.2 million compared to $85.6 million for the prior year period. Cement sales increased $11.3 million from the prior year period. Our Texas market area accounted for approximately 67% of cement sales in each of the three -month periods ended August 31, 2012 and August 31, 2011. Average cement prices increased 3% in our Texas market from the prior year period. Average cement prices decreased 7% due to a change in product mix in our California market from the prior year period. Shipments increased 11% in our Texas market area and 24% in our California market area.

Cost of products sold for the three-month period ended August 31, 2012 increased $7.9 million from the prior year period primarily due to higher shipments. Cement unit cost of sales decreased 4% from prior year period primarily due to lower energy costs.

Selling, general and administrative expense for the three-month period ended August 31, 2012 decreased $0.5 million from the prior year period primarily due to our work force reduction initiatives.

Other income for the three-month period ended August 31, 2012 decreased $2.3 million from the prior year period. The sales of emission credits associated with our Crestmore cement plant in Riverside, California resulted in gain of $2.5 million in the three-month period ended August 31, 2011.

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Aggregate Operations

	Three months ended August 31,
In thousands except per unit	2012			2011
Operating Results
Stone, sand and gravel sales	$	28,151		$	22,200
Expanded shale and clay sales and delivery fees		30,523			22,901
Total segment sales		58,674			45,101
Cost of products sold		49,041			38,508
Gross profit		9,633			6,593
Selling, general and administrative		(2,330	)		(2,950	)
Other income		1,716			272
Operating Profit	$	9,019		$	3,915
Stone, sand and gravel
Shipments (tons)		3,914			3,143
Prices ($/ton)	$	7.19		$	7.06
Cost of sales ($/ton)	$	5.98		$	6.22

Aggregate operating profit for the three-month periods ended August 31, 2012 and August 31, 2011 was $9.0 million and $3.9 million, respectively.

Total segment sales for the three-month period ended August 31, 2012 were $58.7 million compared to $45.1 million for the prior year period. Stone, sand and gravel sales increased $6.0 million from the prior year period on 25% higher shipments and 2% higher average prices.

Cost of products sold for the three-month period ended August 31, 2012 increased $10.5 million from the prior year period primarily due to increased stone, sand and gravel shipments. Stone, sand and gravel unit costs decreased 4% from the prior year period primarily due to the effect of higher shipments on unit costs.

Selling, general and administrative expense for the three-month period ended August 31, 2012 decreased $0.6 million from the prior year period primarily due to our work force reduction initiatives.

Other income for the three-month period ended August 31, 2012 increased $1.4 million primarily due to higher gains from routine sales of surplus operating assets.

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Consumer Products Operations

	Three months ended August 31,
In thousands except per unit	2012			2011
Operating Results
Ready-mix concrete sales	$	51,918		$	56,228
Package products sales and delivery fees		127			14,796
Total segment sales		52,045			71,024
Cost of products sold		52,673			71,197
Gross loss		(628	)		(173	)
Selling, general and administrative		(2,690	)		(4,374	)
Other income		1,410			2,207
Operating Loss	$	(1,908	)	$	(2,340	)
Ready-mix concrete
Shipments (cubic yards)		649			741
Prices ($/cubic yard)	$	80.08		$	75.93
Cost of sales ($/cubic yard)	$	80.97		$	78.91

Consumer products operating loss for the three-month periods ended August 31, 2012 and August 31, 2011 was $1.9 million and $2.3 million, respectively. Operating loss for the three-month period ended August 31, 2011 includes $1.5 million profit from our Texas-based package products operations sold in April 2012. Operating results for ready-mix concrete operations improved $1.9 million from the prior year period.

Total segment sales for the three-month period ended August 31, 2012 were $52.0 million compared to $71.0 million for the prior year period. Total segment sales for the three-month period ended August 31, 2011 includes $14.7 million from the Texas-based package products operations sold in April 2012. Ready-mix concrete sales decreased $4.3 million from the prior year period. The effect of having exited the Houston, Texas ready-mix market in July 2011 decreased sales $6.6 million, shipments 14% and increased average prices 2% from the prior year period. Ready-mix concrete sales from ongoing operations increased $2.3 million from the prior year period on 2% higher shipments and 3% higher average prices.

Cost of products sold for the three-month period ended August 31, 2012 decreased $18.5 million from the prior year period primarily due to the sale of our Texas-based package products operation and having exited the Houston ready-mix market. Ready-mix concrete unit costs increased 3% from the prior year period.

Selling, general and administrative expense for the three-month period ended August 31, 2012 decreased $1.7 million from the prior year period primarily due to the effect of the sale of our Texas-based package products operations and our work force reduction initiatives.

Other income for the three-month period ended August 31, 2012 decreased $0.8 million from the prior year period. The decrease was primarily due to the recognition of a $2.1 million gain as a result of the disposition of ready-mix operations in Houston, Texas through the asset exchange transaction in July 2011. Gains from routine sales of surplus operating assets increased $0.5 million from the prior year period. In addition, earnings from joint venture of $0.6 million were recognized in the three-month period ended August 31, 2012.

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Corporate

	Three months ended August 31,
In thousands	2012			2011
Other income	$	46		$	203
Selling, general and administrative		(10,315	)		(6,402	)
	$	(10,269	)	$	(6,199	)

Other income for the three-month period ended August 31, 2012 decreased $0.2 million from the prior year period primarily due to lower oil and gas royalty payments.

Selling, general and administrative expense for the three-month period ended August 31, 2012 increased $4.0 million from the prior year period primarily due to $2.8 million higher stock-based compensation expense and $1.0 million higher expenses as the result of our realignment of administrative functions.

Interest

Interest expense incurred for the three-month period ended August 31, 2012 was $17.1 million, of which $9.3 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $7.8 million was expensed. Interest expense incurred for the three-month period ended August 31, 2011 was $17.3 million, of which $7.8 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $9.5 million was expensed.

Interest expense incurred for the three-month period ended August 31, 2012 decreased $0.2 million from the prior year period primarily as a result of lower credit facility fees.

Interest expense to be capitalized in connection with our Hunter, Texas cement plant expansion project during the remainder of our current fiscal year is expected to be between $21 million and $27 million.

Income Taxes

Income taxes for the interim periods ended August 31, 2012 and August 31, 2011 have been included in the accompanying financial statements on the basis of an estimated annual rate. The tax rate differs from the 35% federal statutory corporate rate primarily due to percentage depletion that is tax deductible, state income taxes and valuation allowances against deferred tax assets. The estimated annualized rate is (5.9)% for fiscal year 2013 compared to 1.8% for fiscal year 2012. We made no income tax payments in the three-month periods ended August 31, 2012 and August 31, 2011. We received income tax refunds of less than $0.1 million in the three-month period ended August 31, 2011.

Net deferred tax assets totaled $13.5 million at August 31, 2012 and $13.7 million at May 31, 2012, of which $10.4 million at August 31, 2012 and $10.7 million at May 31, 2012 were classified as current. Management reviews our deferred tax position and in particular our deferred tax assets whenever circumstances indicate that the assets may not be realized in the future and records a valuation allowance unless such deferred tax assets are deemed more likely than not to be recoverable. The ultimate realization of these deferred tax assets depends upon various factors including the generation of taxable income during future periods. The Company’s deferred tax assets exceeded deferred tax liabilities as of August 31, 2012 and May 31, 2012 primarily as a result of recent losses. Management has concluded that the sources of taxable income we are permitted to consider do not assure the realization of the entire amount of our net deferred tax assets. Accordingly, a valuation allowance is required due to the uncertainty of realizing the deferred tax assets. We recorded a valuation allowance of $5.2 million in fiscal year 2012 through a charge to other comprehensive loss given the increase in actuarial losses in our retirement plans in 2012. We will continue to record additional valuation allowance against additions to our net deferred tax assets for fiscal year 2013 until Management’s assurance for the realization of its deferred tax assets are deemed more likely than not to be recoverable.

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LIQUIDITY AND CAPITAL RESOURCES

In addition to cash and cash equivalents of $60.9 million at August 31, 2012, our sources of liquidity include cash from operations and borrowings available under our senior secured revolving credit facility.

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

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

The borrowing base under the agreement was $155.3 million as of August 31, 2012. We are not required to maintain any financial ratios or covenants unless an event of default occurs or the unused portion of the borrowing base is less than $25 million, in which case we must maintain a fixed charge coverage ratio of at least 1.0 to 1.0. At August 31, 2012, our fixed charge coverage ratio was (.15) to 1.0. Given this ratio, we may use only $130.3 million of the borrowing base as of such date. No borrowings were outstanding at August 31, 2012; however, $28.6 million of the borrowing base was used to support letters of credit. As a result, the maximum amount we could borrow as of August 31, 2012 was $101.7 million.

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

The credit agreement contains a number of covenants restricting, among other things, prepayment or redemption of our senior notes, distributions and dividends on and repurchases of our capital stock, acquisitions and investments, indebtedness, liens and affiliate transactions. We are permitted to pay cash dividends on our common stock as long as the credit facility is not in default, the fixed charge coverage ratio is greater than 1.0 to 1.0 and borrowing availability under the borrowing base is more than $40 million. When our fixed charge coverage ratio is less than 1.0 to 1.0, we are permitted to pay cash dividends on our common stock not to exceed $2.5 million in any single instance (which shall not occur more than four times in any calendar year) or $10 million in the aggregate during any calendar year as long as the credit facility is not in default and borrowing availability is more than the greater of $60 million or 30% of the aggregate commitments of all lenders. For this purpose, borrowing availability is equal to the borrowing base less the amount of outstanding borrowings less the amount used to support letters of credit. We were in compliance with all of our loan covenants as of August 31, 2012.

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

At August 31, 2012, we had $650 million aggregate principal amount of 9.25% senior notes outstanding. Under the indenture, at any time on or prior to August 15, 2015, we may redeem the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. On and after August 15, 2015, we may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

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

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

All of our consolidated subsidiaries have unconditionally guaranteed the 9.25% senior notes. The indenture governing the notes contains affirmative and negative covenants that, among other things, limit our and our subsidiaries’ ability to pay dividends on or redeem or repurchase stock, make certain investments, incur additional debt or sell preferred stock, create liens, restrict dividend payments or other payments from subsidiaries to the Company, engage in consolidations and mergers or sell or transfer assets, engage in sale and leaseback transactions, engage in transactions with affiliates, and sell stock in our subsidiaries. We are not required to maintain any affirmative financial ratios or covenants. We were in compliance with all of our covenants as of August 31, 2012.

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

During October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. In May 2009 we temporarily halted construction on the project because we believed that economic and market conditions made it unlikely that cement demand levels in Texas at that time would permit the new kiln to operate profitably if the project was completed as originally scheduled. We resumed construction in October 2010 and expect to begin commissioning in the fall of 2012. The total capital cost of the project is expected to be between $365 million and $375 million, excluding capitalized interest. As of August 31, 2012, we have incurred $363.5 million, excluding capitalized interest of $78.0 million related to the project, of which $354.1 million has been paid.

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

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Cash Flows

Net cash provided by operating activities for the three-month period ended August 31, 2012 was $2.1 million. Net cash used by operating activities for the three-month period ended August 31, 2011 was $7.4 million. The increase was primarily the result of higher income from operations and changes in working capital items.

Net cash used by investing activities for the three-month periods ended August 31, 2012 and August 31, 2011 was $28.9 million and $44.8 million, respectively.

Capital expenditures incurred in connection with the expansion of our Hunter, Texas cement plant were $28.1 million and $25.2 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively, of which $18.4 million and $15.5 million was capitalized interest paid in the three-month periods ended August 31, 2012 and August 31, 2011, respectively. Capital expenditures for normal replacement and upgrades of existing equipment and acquisitions to sustain existing operations were $4.5 million and $20.4 million in the three-month periods ended August 31, 2012 and August 31, 2011, respectively, of which $18.0 million was incurred to acquire aggregate reserves in the three-month period ended August 31, 2011.

Net cash used by financing activities for the three-month periods ended August 31, 2012 and August 31, 2011 was $0.3 million and $3.7 million, respectively. Debt issuance costs incurred in connection with the extension and modification of our credit facility were $1.6 million in the three-month period ending August 31, 2011. Dividends paid on our common stock were $2.1 million for the three-month period ended August 31, 2011. On October 12, 2011 the Company suspended payment of its quarterly cash dividend.

OTHER ITEMS

Environmental Matters

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

Market Risk

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

The estimated fair value of each class of financial instrument as of August 31, 2012 and May 31, 2012 approximates its carrying value except for long-term debt having fixed interest rates. The fair value of our long-term debt is estimated based on broker/dealer quoted market prices. As of August 31, 2012, the fair value of our long-term debt, including the current portion, was approximately $698.3 million compared to the carrying amount of $659.3 million. As of May 31, 2012, the fair value of our long-term debt, including the current portion, was approximately $646.8 million compared to the carrying amount of $658.2 million.

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

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Critical Accounting Policies

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

Recently Issued Accounting Guidance

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

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the

Private Securities Litigation Reform Act of 1995

Certain statements contained in this quarterly report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan,” “anticipate,” and other similar words. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on our business, the cyclical and seasonal nature of our business, the level of construction activity in our markets, abnormal periods of inclement weather, unexpected periods of equipment downtime, unexpected operational difficulties, changes in the cost of raw materials, fuel and energy, changes in cost or availability of transportation, changes in interest rates, the timing and amount of federal, state and local funding for infrastructure, delays in announced capacity expansions, ongoing volatility and uncertainty in the capital or credit markets, the impact of environmental laws, regulations and claims, changes in governmental and public policy, and the risks and uncertainties described in our reports on Forms 10-K, 10-Q and 8-K. Forward-looking statements speak only as of the date hereof, and we assume no obligation to publicly update such statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of August 31, 2012.

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

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this item is included in Note 9 of Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report and incorporated herein by reference.

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

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

Issuer Purchases of Equity Securities. We are restricted by our loan covenants from purchasing our Common Stock on the open market. However, in connection with so-called “stock swap exercises” of employee stock options, shares are surrendered or deemed surrendered to the Company to pay the exercise price. The following table presents information with respect to such transactions which occurred during the three-month period ended August 31, 2012.

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
June 1, 2012 – June 30, 2012		—	$	—		—		—
July 1, 2012 - July 31, 2012		—		—		—		—
August 1, 2012 – August 31, 2012		4,770		43.33		—		—
Total		4.770	$	43.33		—		—

Item 4. Mine Safety Disclosures

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

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Item 6. Exhibits

The following exhibits are included herein:

3.1	Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010)
3.2	Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010)
3.3	Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006)
4.1	Form of the Company’s 9 1/4% Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010)
4.2	Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010)
4.3	Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010)
10.1	Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010)
10.2	Third Amended and Restated Credit Agreement, dated as of August 25, 2011, among the Company, Bank of America, N.A., as Administrative Agent, Lead Collateral Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 31, 2011)
10.3	Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010)
10.4	First Amendment to Amended and Restated Security Agreement, dated as of August 25, 2011, among the Company, the Subsidiary Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 31, 2011)
10.5	Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010)
10.6	Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994)
10.7	Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.8	Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006)
10.9	Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009)
10.10	TXI Annual Incentive Plans-Fiscal Year 2013 (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 17, 2012)
10.11	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2013 (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K filed on July 21, 2010)
10.12	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2014 (incorporated by reference to Exhibit 10.18 to Annual Report on Form 10-K filed on July 15, 2011)

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10.13	TXI Three Year Incentive Plan for the Three Consecutive Fiscal Year Periods Ending May 31, 2015 (incorporated by reference to Exhibit 10.13 to Annual Report on Form 10-K filed on July 17, 2012)
10.14	Master Performance-Based Incentive Plan (incorporated by reference to Appendix A to definitive proxy statement filed on August 25, 2006)
10.15	Texas Industries, Inc. 2003 Share Appreciation Rights Plan (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K filed on August 12, 2005)
10.16	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)
10.17	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)
10.18	Deferred Compensation Plan for Directors of Texas Industries, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 24, 2006)
10.19	Form of 2005 Executive Financial Security Plan (Annuity Formula), as amended (incorporated by reference to Exhibit 10.26 to Quarterly Report on Form 10-Q filed on January 7, 2010)
10.20	Form of 2005 Executive Financial Security Plan (Lump Sum Formula), as amended (incorporated by reference to Exhibit 10.27 to Quarterly Report Form 10-Q filed on January 7, 2010)
10.21	Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on April 25, 2006)
10.22	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)
10.23	Contract, signed September 21, 2007, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.28 to Quarterly Report on Form 10-Q filed on September 27, 2007, noting that portions of the exhibit have been omitted pursuant to a request for confidential treatment)
10.24	Contract Amendment No. 1, executed August 17, 2009, between TXI Operations, LP and Amec-Zachry Contractors (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 21, 2009)
12.1	Computation of Ratios of Earnings to Fixed Charges
15.1	Letter re unaudited Interim Financial Information
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
95.1	Mine Safety Disclosure Exhibit
101	The following financial information from Texas Industries, Inc.’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of August 31, 2012 and May 31, 2012, (ii) Consolidated Statements of Operations for the three months ended August 31, 2012 and August 31, 2011, (iii) Consolidated Statements of Comprehensive Loss for the three months ended August 31, 2012 and August 31, 2011, (iv) Consolidated Statements of Cash Flows for the three months ended August 31, 2012 and August 31, 2011, and (v) the Notes to Consolidated Financial Statements.

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SIGNATURES

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

	TEXAS INDUSTRIES, INC.
September 28, 2012	/s/ Kenneth R. Allen
	Kenneth R. Allen
	Vice President – Finance and Chief Financial Officer
	(Principal Financial Officer)
September 28, 2012	/s/ T. Lesley Vines
	T. Lesley Vines
	Vice President – Corporate Controller and Treasurer
	(Principal Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number
3.1	Composite Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on July 21, 2010)
3.2	Bylaws (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on January 14, 2010)
3.3	Amended and Restated Certificate of Designations of Series B Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on November 1, 2006)
4.1	Form of the Company’s 9 1/4% Senior Note due 2020 and Notation of Guarantee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed on August 11, 2010)
4.2	Registration Rights Agreement, dated as of August 10, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on August 11, 2010)
4.3	Indenture, dated as of August 10, 2010, among the Company, the Guarantors and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 11, 2010)
10.1	Purchase Agreement, dated July 27, 2010, among the Company and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 2, 2010)
10.2	Third Amended and Restated Credit Agreement, dated as of August 25, 2011, among the Company, Bank of America, N.A., as Administrative Agent, Lead Collateral Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 31, 2011)
10.3	Amended and Restated Security Agreement, dated June 19, 2009, among the Company, the Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed on January 7, 2010)
10.4	First Amendment to Amended and Restated Security Agreement, dated as of August 25, 2011, among the Company, the Subsidiary Guarantors and Bank of America, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 31, 2011)
10.5	Employment Agreement of Mel G. Brekhus dated as of April 14, 2010 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 16, 2010)
10.6	Texas Industries, Inc. 1993 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 filed on May 19, 1994)
10.7	Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed on January 5, 2007)
10.8	Form of Stock Option Agreement under Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 25, 2006)
10.9	Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 16, 2009)
10.10	TXI Annual Incentive Plans-Fiscal Year 2013 (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K filed on July 17, 2012)

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Index to Exhibits-(Continued)

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

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Index to Exhibits-(Continued)

Exhibit Number
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
95.1	Mine Safety Disclosure Exhibit
101	The following financial information from Texas Industries, Inc.’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of August 31, 2012 and May 31, 2012, (ii) Consolidated Statements of Operations for the three months ended August 31, 2012 and August 31, 2011, (iii) Consolidated Statements of Comprehensive Loss for the three months ended August 31, 2012 and August 31, 2011, (iv) Consolidated Statements of Cash Flows for the three months ended August 31, 2012 and August 31, 2011, and (v) the Notes to Consolidated Financial Statements.

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