TEXAS INDUSTRIES INC, S-3/A, 1998-04-24

TEXAS INDUSTRIES INC
S-3/A, 1998-04-24
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998

REGISTRATION NO. 333-50517
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO

FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TEXAS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5039 75-0832210
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

TEXAS INDUSTRIES, INC.
1341 WEST MOCKINGBIRD LANE
DALLAS, TEXAS 75247-6913
(972) 647-6700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

ROBERT C. MOORE
VICE PRESIDENT -- GENERAL COUNSEL AND SECRETARY
TEXAS INDUSTRIES, INC.
1341 WEST MOCKINGBIRD LANE
DALLAS, TEXAS 75247-6913
(972) 647-6700
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
---------------------

Copies to:

<TABLE>
<S> <C>
DAN BUSBEE
VAN M. JOLAS
LOCKE PURNELL RAIN HARRELL STEVEN R. FINLEY
(A PROFESSIONAL CORPORATION) GIBSON, DUNN & CRUTCHER LLP
2200 ROSS AVENUE, SUITE 2200 200 PARK AVENUE
DALLAS, TEXAS 75201-6776 NEW YORK, NEW YORK 10166-0193
(214) 740-8000 (212) 351-4000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS Subject to Completion, Dated April 24, 1998
- --------------------------------------------------------------------------------

2,900,000 Shares

TEXAS INDUSTRIES, INC.
[TXI LOGO]
Common Stock

- --------------------------------------------------------------------------------

The 2,900,000 shares of common stock, par value $1.00 per share (the "Common
Stock"), are being offered hereby (the "Offering") by Texas Industries, Inc.
("TXI" or the "Company"). The Common Stock is listed on the New York Stock
Exchange ("NYSE") under the symbol "TXI." On April 22, 1998, the last reported
sales price of the Common Stock on the NYSE was $66.8125 per share. See "Price
Range of Common Stock and Dividends."

FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 7.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Per Share $ $ $
- ----------------------------------------------------------------------------------------------
Total(3) $ $ $
- ----------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $350,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
435,000 additional shares of Common Stock on the same terms per share solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public will be $ , the total Underwriting Discounts
and Commissions will be $ and the total Proceeds to Company will be
$ . See "Underwriting."

The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of the certificates
therefor will be made at the offices of SBC Warburg Dillon Read Inc., New York,
New York, on or about May , 1998.

SBC WARBURG DILLON READ INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
<PAGE> 3

[PICTURE OF RIVERSIDE, ILLUSTRATION OF VIRGINIA STEEL FACILITY, PICTURE OF
CEMENT KILN, PICTURE OF BEAM BLANK AND WIDE FLANGE BEAM CROSS SECTIONS]

[TEXT READS: "RECENTLY, TXI ACQUIRED RIVERSIDE CEMENT COMPANY, INCREASING
THE COMPANY'S CEMENT PRODUCTION CAPACITY BY 60% AND PROVIDING ACCESS TO
CALIFORNIA, THE LARGEST CEMENT MARKET IN THE U.S. SHOWN ABOVE IS RIVERSIDE'S ORO
GRANDE CEMENT PLANT. SCHEDULED TO BEGIN PRODUCTION IN 1999, TXI'S VIRGINIA STEEL
FACILITY WILL SUPPLY A WIDE RANGE OF STRUCTURAL STEEL PRODUCTS TO NORTH AMERICAN
CONSTRUCTION MARKETS. THE FACILITY WILL EXPAND TXI'S STEEL PRODUCTION CAPACITY
BY APPROXIMATELY 60%. THE INTERIOR OF A CEMENT KILN (SHOWN ABOVE) REACHES
TEMPERATURES IN EXCESS OF 2800 degreesF. TXI DEVELOPED AND PATENTED THE
CEMSTAR(TM) PROCESS WHICH INTRODUCES SLAG, A CO-PRODUCT OF STEEL-MAKING, INTO
THE KILN IN ORDER TO INCREASE CEMENT PRODUCTION AT LITTLE ADDITIONAL COST.
STRUCTURAL PRODUCTS, LIKE WIDE FLANGE BEAMS (CROSS SECTION SHOWN ABOVE, MIDDLE),
ARE ROLLED FROM BEAM BLANKS CAST FROM MOLTEN STEEL. UNLIKE PROCESSES WHICH CAST
LARGE BEAM BLANKS (CROSS SECTION, TOP LEFT), TXI'S PATENTED NEAR NET SHAPE
PROCESS CASTS A BEAM BLANK THAT RESEMBLES THE FINISHED BEAM SHAPE (CROSS
SECTION, TOP RIGHT), SAVING ENERGY AND CAPITAL COSTS."]

TXI(TM), CemStar(TM), Bantam Beams(TM) and Diamond Pro(TM) are registered
trademarks of the Company.
---------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK AND THE IMPOSITION OF A PENALTY BID DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with (i) Management's Discussion and Analysis of Financial
Condition and Results of Operations and (ii) the Consolidated Financial
Statements and Notes thereto and the more detailed information appearing
elsewhere in this Prospectus or incorporated herein by reference. Unless the
context otherwise requires, references to the "Company" or "TXI" mean Texas
Industries, Inc. and its direct and indirect subsidiaries. Except as otherwise
indicated, all information in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised. All financial and share data in this
Prospectus have been adjusted to give effect to the two-for-one stock split
effected on February 3, 1997. All references to a particular fiscal year refer
to the 12 months ended on May 31 of the year referenced (e.g., fiscal 1997 means
the fiscal year ended May 31, 1997).

THE COMPANY

GENERAL

TXI is a leading supplier of construction materials through two business
segments: cement, aggregate and concrete products (the "CAC" segment); and
structural steel and specialty bar products (the "Steel" segment). The Company
is the largest producer of cement in Texas and the second largest supplier of
structural steel products in North America. Demand for structural steel, cement,
aggregate and concrete products is primarily driven by construction activity,
while specialty bar products supply the original equipment manufacturer, tool
and oil country goods markets. From fiscal 1994 to fiscal 1997, TXI's net sales
and net income have grown at a compound annual rate of 11% and 43%,
respectively. For the 12 months ended February 28, 1998, the Company generated
$1.1 billion in net sales and $94.3 million in net income.

The Company is the only major North American producer of both cement and
steel. TXI has derived significant benefits therefrom, primarily in lowering
production costs and enhancing productivity through the innovative recycling of
by-products of manufacturing. The Company has extensive operating experience in
both of its business segments. Founded in 1951, the Company began its cement
operations in 1960 with the opening of its Midlothian, Texas facility and added
its steel operations in 1975 with the construction of a plant in Midlothian.

BUSINESS STRATEGY

The Company's business strategy is to grow profitably in both of its
business segments by achieving and maintaining market leadership positions in
desirable markets, capitalizing on innovation in manufacturing processes and
products, being the low cost supplier, pursuing strategic growth opportunities
and preserving financial strength and flexibility in order to capitalize on
these opportunities when they arise.

The key elements of the Company's strategy are:

Achieve and Maintain Market Leadership. The Company strives to be the
number one or two supplier in desirable markets. The Company is:

- The largest producer of cement in Texas and a major cement producer in
California, the two largest cement markets in the U.S.
- The second largest supplier of structural steel products in North
America.
- The largest supplier of light weight steel beams used in manufactured
housing in North America.
- The largest supplier of expanded shale and clay aggregate products west
of the Mississippi River.
- The largest supplier of stone, sand and gravel aggregate products and the
second largest supplier of ready-mix concrete in North Texas.
- The largest supplier of sand and gravel aggregate products and ready-mix
concrete in Louisiana.

3
<PAGE> 5

Capitalize on Innovation in Manufacturing Processes and Products. The
Company emphasizes the development and improvement of manufacturing process
technologies and the design and marketing of new products. Research and
development of manufacturing processes and products is considered to be every
employee's responsibility at TXI. All employees are empowered to seek and
implement creative ideas to improve operations and results.

- TXI pioneered and is a leader in the manufacture of wide flange beams and
other structural steel products using recycled steel.
- TXI developed and patented near net shape casting, a process which
provides energy and capital cost savings in the making of wide flange
beams and other structural steel products.
- TXI developed and patented the CemStar process, which uses a co-product
from steel-making to increase cement production with little additional
cost. TXI continues to research and refine processes for the recovery and
recycling of waste and the by-products generated by manufacturing
processes.
- TXI continues to develop new, higher-margin products, such as Bantam
Beams and Diamond Pro professional groundskeeping products.

Be the Low Cost Supplier. The Company's focus on market leadership is
accompanied by its determination to drive down production and distribution costs
in order to be the low cost supplier to its customers.

- TXI operates the largest steel shredder in the world, currently supplying
42% of its total steel raw material needs. The shredder enables the
Company to access a continuous source of low cost, unprocessed scrap
steel in order to reduce costs and exposure to increasing prices for
higher grade recycled steel.
- TXI is a leader in substituting alternative fuels for the nonrenewable
fuels typically used in the energy intensive cement manufacturing
process. The Company lowers cement manufacturing costs both by reducing
expenditures for the nonrenewable fuels and by receiving income for the
management of alternative fuels received from third party generators of
such fuels.

Pursue Strategic Growth Opportunities. The Company pursues profitable
growth by building on its business and operational expertise in order to enter
new markets and introduce new products.

- A structural steel facility being constructed in Virginia will combine a
steel shredder, near net shape casting, state-of-the-art steel melting
technology and a proprietary rolling mill design to achieve low
production costs and the widest structural steel product range available
from a single facility.
- The acquisition of Riverside Cement Company ("Riverside") provides TXI
access to California, the largest cement market in the U.S. The Company
intends to implement its CemStar process at Riverside in the near term to
enhance productivity and increase capacity. The Company also intends to
upgrade and modernize Riverside's existing portland cement plant with
higher capacity and more cost efficient equipment in order to move into a
position of leadership in the California regional market.
- TXI intends to increase its Midlothian cement capacity from 1.3 million
to 2.8 million tons per year in order to maintain and enhance its
position as the largest producer of cement in Texas.
- TXI is upgrading its specialty bar products capability to further improve
product mix and increase the breadth of markets addressed.
- TXI has embarked on a program to license its CemStar process to cement
producers throughout the world.
- TXI continues to pursue investments for internal growth and opportunistic
acquisitions in order to build on leadership positions in its stone, sand
and gravel, expanded shale and clay and concrete operations.

Preserve Financial Strength and Flexibility. The Company strives to be
financially positioned to pursue profitable growth opportunities as they arise.
TXI expects that the proceeds of this Offering will enable the Company to
maintain its commitment to a strong financial position and pursue its business
strategy on a sound financial basis.

4
<PAGE> 6

RECENT DEVELOPMENTS

On December 31, 1997, the Company acquired the 15.7% separate public
ownership of Chaparral Steel Company ("Chaparral") consisting of approximately
4.5 million publicly traded shares. The Company agreed to pay approximately
$77.1 million in this transaction, including transaction expenses. With the
acquisition of these shares, TXI's net income will no longer be reduced by
minority interest.

On December 31, 1997, the Company acquired Riverside, the owner of a 1.3
million ton per year portland cement plant and a 100,000 ton per year specialty
white cement plant. The acquisition increased TXI's cement capacity by 60% and
opened the California regional cement market to the Company. With the
acquisition of Riverside, the Company ranks seventh among all domestic cement
producers and becomes the third largest U.S. publicly traded cement producing
company.

TXI is constructing a structural steel facility in Virginia, scheduled to
begin operations in the summer of 1999, which will expand TXI's steel production
capacity by approximately 60%. In March 1998, TXI filed for a permit to expand
its Midlothian, Texas cement plant's annual production from 1.3 million to 2.8
million tons, and the Company anticipates upgrading its portland cement plant in
California in the next several years.

The Company's principal executive offices are located at 1341 West
Mockingbird Lane, Dallas, Texas 75247-6913, and its telephone number is (972)
647-6700.

THE OFFERING

Common Stock being offered hereby..... 2,900,000 shares

Common Stock to be outstanding after
the Offering.......................... 24,045,623 shares(1)

Use of proceeds....................... For general corporate purposes,
including the repayment of
outstanding indebtedness under the
Company's revolving credit facility.
See "Use of Proceeds."

New York Stock Exchange symbol........ TXI
- ---------------

(1) Based on the number of outstanding shares at April 22, 1998. Excludes (i) an
aggregate of 1,861,827 shares of Common Stock issuable upon exercise of
stock options outstanding on that date at a weighed average exercise price
of $27.24 per share, of which options to purchase 475,077 shares were
exercisable as of such date, and (ii) 1,918,530 shares of Common Stock
available for the future grant of stock options under the Company's stock
option plans. See Notes to the annual Consolidated Financial Statements.

5
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED MAY 31, FEBRUARY 28,
------------------------------ -------------------------
1995 1996 1997 1997 1998
-------- -------- -------- ---------- ------------
($ IN THOUSANDS EXCEPT DATA PER COMMON SHARE)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.................................... $830,526 $967,449 $973,824 $ 696,936 $ 861,168
Costs and expenses (income)
Cost of products sold...................... 681,824 756,715 767,030 554,956 683,116
Selling, general and administrative........ 58,275 68,852 76,535 56,006 67,798
Interest................................... 20,117 19,960 18,885 14,165 14,418
Other income............................... (7,571) (13,119) (11,848) (7,169) (10,603)
-------- -------- -------- ---------- ----------
752,645 832,408 850,602 617,958 754,729
-------- -------- -------- ---------- ----------
Income before the following items............ 77,881 135,041 123,222 79,978 106,439
Income taxes................................. 25,700 47,256 41,189 26,767 35,252
-------- -------- -------- ---------- ----------
52,181 87,785 82,033 52,211 71,187
Minority interest in Chaparral(1)............ (4,164) (7,831) (6,559) (4,298) (4,400)
-------- -------- -------- ---------- ----------
Net income................................... $ 48,017 $ 79,954 $ 75,474 $ 47,913 $ 66,787
======== ======== ======== ========== ==========
PER SHARE DATA:
Basic
Average common shares...................... 24,567 22,203 21,751 22,012 21,066
Net income per common share................ $ 1.96 $ 3.61 $ 3.48 $ 2.18 $ 3.18
======== ======== ======== ========== ==========
Diluted
Average common shares...................... 24,817 22,682 22,163 22,457 21,717
Net income per common share................ $ 1.94 $ 3.53 $ 3.42 $ 2.14 $ 3.08
======== ======== ======== ========== ==========
Cash dividends per common share.............. $ 0.15 $ 0.20 $ 0.25 $ 0.18 $ 0.23
OTHER DATA:
EBITDA(2).................................... $147,340 $204,281 $196,016 $ 134,122 $ 165,858
Capital expenditures......................... 48,751 79,300 85,188 65,262 344,335
Long-term debt to total capitalization (at
end of
period)(3)................................. 35.1% 27.6% 28.0% 30.3% 41.6%
</TABLE>

<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28, 1998
------------------------------ ---------------------------
1995 1996 1997 ACTUAL AS ADJUSTED(4)
-------- -------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Net working capital.......................... $187,603 $219,345 $242,994 $ 221,532 $ 368,704
Total assets................................. 753,055 801,063 847,923 1,117,368 1,264,540
Long-term debt............................... 185,274 160,209 176,056 369,404 331,404
Shareholders' equity......................... 343,109 420,022 452,811 517,549 702,721
</TABLE>

- ---------------

(1) On December 31, 1997, TXI acquired the 15.7% in Chaparral previously held by
public shareholders.
(2) EBITDA is earnings before interest, income taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to income
from operations or cash flow from operating activities (each determined in
accordance with generally accepted accounting principles).
(3) Long-term debt to total capitalization at February 28, 1998, as adjusted to
give effect to the Offering and the use of the net proceeds thereof, would
have been 32.0%.
(4) Gives effect to the Offering and the use of net proceeds thereof. See "Use
of Proceeds."

6
<PAGE> 8

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Common
Stock offered by this Prospectus. Certain statements contained hereunder under
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" or contained in
the documents incorporated herein by reference, including those concerning the
Company's strategy and growth plans, contain certain forward-looking statements
concerning the Company's operations, economic performance and financial
condition. Because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause such differences include,
but are not limited to, those discussed below.

COMPETITION

All of the markets in which the Company participates are highly
competitive. The Company competes in each of its cement, aggregate and concrete
products markets with several other suppliers of these products. The Company
competes in its steel markets with national and international producers of steel
products. Some of the Company's competitors are larger, have greater financial
resources and have less financial leverage than the Company. The Company
competes on the basis of, among other things, competitive prices, prompt
availability, customer service and quality products.

SENSITIVITY TO ECONOMIC CYCLES; SEASONALITY

A significant percentage of the Company's sales of both CAC and Steel
products is attributable to the level of construction activity, which is
affected by such cyclical factors as general economic conditions, interest
rates, inflation, consumer spending habits and employment. The Company's CAC
operating profit is generally lower in its fiscal quarter ended February 28 as
compared to the other three fiscal quarters due to the impact of winter weather
on construction activity. Steel results in the fiscal quarter ended August 31
are affected by the Company's scheduled summer shut-down to refurbish its steel
production facilities.

ACHIEVING GROWTH STRATEGY; ABILITY TO COMPLETE ACQUISITIONS

The Company's ability to implement its growth strategy successfully is
dependent on a number of factors including competition, the availability of
capital and general economic conditions. In addition, a significant element of
the Company's operating strategy is to pursue strategic acquisitions that either
expand or complement the Company's products or markets or to build new or expand
existing production facilities. There can be no assurance that the Company will
be able to identify and make acquisitions on acceptable terms, that the Company
will be able to obtain the permits necessary to build new or expand existing
production facilities, that the Company will be able to obtain financing for
such acquisitions or expansions on acceptable terms or that the Company will be
able successfully to integrate such acquisitions into existing operations.

AVAILABILITY AND PRICING OF RAW MATERIALS

The Company is dependent upon purchased scrap steel as a raw material and
upon energy sources, including electricity and fossil fuels. Accordingly, the
Company's results of operations and financial condition have in the past been,
and may again in the future be, adversely affected by increases in raw material
costs or energy costs, or their lack of availability.

STATUS OF CERTAIN TARIFFS

A group of domestic cement producers, including the Company, filed
antidumping petitions which have resulted in the imposition of significant
antidumping duty cash deposits on grey portland cement and clinker imported from
Mexico and Japan. In addition, the U.S. Department of Commerce has signed
agreements with the Venezuelan Government and Venezuelan cement producers, which
are designed to eliminate the dumping and illegal subsidization of grey portland
cement and clinker from Venezuela. On an annual basis, the antidumping
7
<PAGE> 9

duties are subject to review by the Department of Commerce to determine whether
the current antidumping duty deposit rates should be adjusted upward or
downward.

In 1995, the Antidumping Code of the General Agreement on Tariffs and Trade
was substantially altered pursuant to the Uruguay Round of multilateral trade
negotiations. U.S. legislation approving and implementing the Uruguay Round
agreements requires the Department of Commerce and the U.S. International Trade
Commission to conduct "sunset" reviews of all outstanding antidumping and
countervailing duty orders and suspension agreements, including the antidumping
orders against grey portland cement and clinker from Mexico and Japan and the
suspension agreements on grey portland cement and clinker from Venezuela, to
determine whether they should be terminated or remain in effect. The sunset
reviews of the cement orders and suspension agreements are scheduled to begin no
later than August 1999 and conclude within one year (i.e., August 2000), or, if
extended, to conclude not later than February 2001. There is no experience as
yet on sunset reviews; therefore, it is difficult to assess the likelihood that
the orders or suspension agreements will be terminated. A substantial reduction
or elimination of the existing antidumping duties could adversely affect the
Company's results of operations. The exact net impact, if any, on the Company is
impossible to determine at this time.

IMPACT OF ENVIRONMENTAL LAWS

The operations of the Company and its subsidiaries are subject to various
federal and state environmental laws and regulations ("Environmental Laws" or
"Laws"). Under these Laws, the U.S. Environmental Protection Agency ("EPA") and
agencies of state government have the authority to promulgate regulations which
could result in substantial expenditures for pollution control and solid waste
treatment and disposal. Three major areas regulated by these authorities are air
quality, waste management and water quality.

Emission sources at the Company's facilities are regulated by a combination
of permit limitations and emission standards of statewide application, and the
Company believes that it is in substantial compliance with its permit
limitations and laws and regulations applicable to its existing facilities.
There can be no assurance, however, that future changes in permit limitations
and emission standards will not adversely affect the Company's ability to build
new or expand existing production facilities.

Many of the raw materials, products and by-products associated with the
operation of any industrial facility, including those for the production of
steel, cement or concrete products, contain chemical elements or compounds that
can be designated as hazardous substances. Such raw materials, products and
by-products may also exhibit characteristics that result in their being
classified as a hazardous substance or waste. Some examples are the metals
present in cement kiln dust ("CKD"), the ignitability of the fuels derived from
solid waste which the Company uses as a primary or supplementary fuel
substitution for non-renewable coal and natural gas to fire its cement kilns and
the electric-arc furnace dust ("EAF dust") generated by the Company's steel
facility.

Currently, CKD is exempt from hazardous waste management standards under
the Resource Conservation and Recovery Act ("RCRA") if certain tests are
satisfied. TXI has demonstrated that the CKD it generates satisfies these tests.
However, the EPA plans to apply site-specific waste-management standards to CKD
under the Clean Air Act and RCRA to assure that the environment is protected.
The Company has established operating practices and is implementing waste
management programs which it believes will comply with these anticipated
standards, but there can be no assurances that such practices and programs will
continue to comply in the future.

The Company's utilization of hazardous materials such as gasoline, acids,
solvents and chemicals as well as the materials that have been designated or
characterized as hazardous waste by the EPA which the Company uses for energy
recovery, has necessitated that the Company familiarize its work force with the
more exacting requirements of applicable Environmental Laws and regulations with
respect to human health and the environment related to these activities. The
failure to observe these exacting requirements could jeopardize the Company's
hazardous waste management permits and, under certain circumstances, expose the
Company to significant liabilities and costs of cleaning up releases of
hazardous substances into the environment or claims by employees or others
alleging exposure to hazardous substances.

8
<PAGE> 10

The Company's steel facility generates, in the same manner as other like
steel plants in the industry, EAF dust that contains lead, chromium and cadmium.
The EPA has listed this EAF dust, which is collected in baghouses, as hazardous
waste. The Company has contracts with reclamation facilities in the United
States and Mexico pursuant to which such facilities receive the EAF dust
generated by the Company and recover the metals from the dust for reuse, thus
rendering the dust non-hazardous. In addition, the Company is continually
investigating alternative reclamation technologies and has implemented processes
for diminishing the amount of EAF dust generated.

The Company intends to comply with all legal requirements regarding the
environment, but since many of these requirements are subjective and therefore
not quantifiable, presently not determinable, or are likely to be affected by
future legislation or rule making by government agencies, it is not possible to
accurately predict the aggregate future costs of compliance and their effect on
the Company's operations, future net income or financial condition.
Notwithstanding such compliance, if damage to persons or property or
contamination of the environment has been or is caused by the conduct of the
Company's business or by hazardous substances or wastes used in, generated or
disposed of by the Company, the Company may be liable for such damages and be
required to pay the cost of investigation and remediation of such contamination.
The amount of such liability could be material and there can be no assurance
that the Company will not incur material liability in connection with possible
claims related to the Company's operations and properties under Environmental
Laws.

9
<PAGE> 11

USE OF PROCEEDS

The net proceeds to the Company from the sale of 2,900,000 shares of Common
Stock offered hereby are estimated to be approximately $185.2 million
(approximately $213.0 million if the Underwriters' over-allotment option is
exercised in full), based on an assumed public offering price of $66.8125 per
share (the last reported sales price of the Common Stock on the NYSE Composite
Tape on April 22, 1998) and after deduction of the underwriting discounts and
commissions and estimated offering expenses. The net proceeds from the sale of
the shares of Common Stock will be used by the Company for general corporate
purposes, including repayment of outstanding indebtedness under the Company's
revolving credit facility. The revolving credit facility matures on December 18,
2002, and provides for a fluctuating interest rate per annum based upon LIBOR.
The average interest rate for the 12-month period ended February 28, 1998 was
6.55%. As of April 22, 1998, the Company had drawn approximately $58.0 million
under the revolving credit facility, the majority of which was used to fund
capital expenditures, including the construction of the Virginia steel facility.
Repayment of this indebtedness will not reduce the maximum amount that the
Company from time to time may borrow under the revolving credit facility.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Company's Common Stock is traded on the NYSE under the symbol "TXI."
The following table sets forth for the fiscal year periods indicated, the
intra-day high and low sale prices per share of the Common Stock on the NYSE,
and quarterly cash dividends paid:

<TABLE>
<CAPTION>
PRICE RANGE
------------- DIVIDENDS
HIGH LOW PAID
---- --- ---------
<S> <C> <C> <C>
FISCAL YEAR 1996
First Quarter (ended August 31, 1995).................. $24 7/8 $17 13/16 $.050
Second Quarter (ended November 30, 1995)............... 27 5/8 23 1/4 .050
Third Quarter (ended February 29, 1996)................ 31 1/8 25 1/8 .050
Fourth Quarter (ended May 31, 1996).................... 34 5/8 30 1/4 .050
FISCAL YEAR 1997
First Quarter (ended August 31, 1996).................. $34 5/16 $31 5/16 $.050
Second Quarter (ended November 30, 1996)............... 33 7/16 26 15/16 .050
Third Quarter (ended February 28, 1997)................ 29 5/16 24 1/8 .075
Fourth Quarter (ended May 31, 1997).................... 29 1/4 20 7/8 .075
FISCAL YEAR 1998
First Quarter (ended August 31, 1997).................. $34 11/16 $23 5/8 $.075
Second Quarter (ended November 30, 1997)............... 52 33 5/16 .075
Third Quarter (ended February 28, 1998)................ 58 42 1/2 .075
Fourth Quarter (through April 22, 1998)................ 68 1/8 50 3/4 .075(1)
</TABLE>

- ---------------
(1) On April 20, 1998, the Company's Board of Directors approved a dividend
payable May 29, 1998 to shareholders of record on May 1, 1998.

The last reported sales price per share of the Common Stock on the NYSE
Composite Tape on April 22, 1998 was $66.8125. As of February 28, 1998, there
were approximately 3,650 holders of record of the Common Stock.

Certain of the Company's loan agreements contain covenants which provide
for restrictions on the payment of dividends on Common Stock. See Notes to the
Consolidated Financial Statements for the fiscal quarter ended February 28,
1998.

10
<PAGE> 12

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
February 28, 1998 and as adjusted at such date to give effect to the receipt of
the net proceeds from the sale of 2,900,000 shares of Common Stock offered by
the Company hereby at an assumed offering price of $66.8125 per share (the last
reported sale price of the Common Stock on the NYSE Composite Tape on April 22,
1998). This table should be read in conjunction with the Consolidated Financial
Statements of the Company and Notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
FEBRUARY 28, 1998
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
($ IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt......................... $ 13,430 $ 13,430
======== ==========
Long-term debt:
Revolving credit facility(1).............................. $ 38,000 $ 0
Other long-term debt...................................... 331,404 331,404
-------- ----------
Total long-term debt...................................... 369,404 331,404
Stockholders' equity:
Common Stock, $1.00 par value per share; 40,000,000 shares
authorized; 25,067,226 shares issued; 27,967,226 shares
issued, as adjusted(2)................................. 25,067 27,967
Additional paid-in capital................................ 255,149 437,421
Treasury stock, 3,979,114 shares, at cost................. (87,272) (87,272)
Retained earnings......................................... 324,605 324,605
-------- ----------
Total stockholders' equity............................. 517,549 702,721
-------- ----------
Total capitalization................................... $886,953 $1,034,125
======== ==========
</TABLE>

- ---------------

(1) As of April 22, 1998, the Company had drawn approximately $58.0 million
under its revolving credit facility.
(2) Excludes an aggregate of 1,923,187 shares of Common Stock issuable upon the
exercise of options outstanding under the Company's stock option plans as
of February 28, 1998 at a weighted average exercise price of $26.97 per
share, of which options to purchase 536,437 shares were exercisable at such
date. See Notes to annual Consolidated Financial Statements.

11
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statement of income data and the selected
consolidated balance sheet data as of May 31, 1993, 1994, 1995, 1996 and 1997
and for the fiscal years then ended have been derived from the Company's audited
consolidated financial statements and should be read in conjunction with those
statements, which are included in this Prospectus or incorporated herein by
reference. The selected consolidated statement of income data for the nine month
periods ended February 28, 1997 and 1998 and the consolidated balance sheet data
as of February 28, 1998 were derived from the unaudited consolidated financial
statements included herein. In the opinion of management, the unaudited
information includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations of the Company at the dates and for the periods presented.
Results for the nine month period ended February 28, 1998 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto which are included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED MAY 31, FEBRUARY 28,
---------------------------------------------------- -------------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------------
($ IN THOUSANDS EXCEPT DATA PER COMMON SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales...................... $614,292 $707,147 $830,526 $967,449 $973,824 $696,936 $ 861,168
Costs and expenses (income)
Cost of products sold........ 545,200 598,601 681,824 756,715 767,030 554,956 683,116
Selling, general and
administrative............. 43,116 47,341 58,275 68,852 76,535 56,006 67,798
Interest..................... 32,596 26,231 20,117 19,960 18,885 14,165 14,418
Other income................. (6,639) (8,614) (7,571) (13,119) (11,848) (7,169) (10,603)
-------- -------- -------- -------- -------- -------- ----------
614,273 663,559 752,645 832,408 850,602 617,958 754,729
-------- -------- -------- -------- -------- -------- ----------
Income before the following
items........................ 19 43,588 77,881 135,041 123,222 78,978 106,439
Income taxes................... (646) 15,556 25,700 47,256 41,189 26,767 35,252
-------- -------- -------- -------- -------- -------- ----------
665 28,032 52,181 87,785 82,033 52,211 71,187
Minority interest in
Chaparral(1)................. 393 (2,281) (4,164) (7,831) (6,559) (4,298) (4,400)
-------- -------- -------- -------- -------- -------- ----------
Net income..................... $ 1,058 $ 25,751 $ 48,017 $ 79,954 $ 75,474 $ 47,913 $ 66,787
======== ======== ======== ======== ======== ======== ==========
PER SHARE DATA:
Basic
Average common shares........ 22,076 22,473 24,567 22,203 21,751 22,012 21,066
Net income per common
Share...................... $ 0.06 $ 1.15 $ 1.96 $ 3.61 $ 3.48 $ 2.18 $ 3.18
======== ======== ======== ======== ======== ======== ==========
Diluted
Average common shares........ 25,201 25,273 24,817 22,682 22,163 22,457 21,717
Net income per common
share...................... $ 0.05 $ 1.03 $ 1.94 $ 3.53 $ 3.42 $ 2.14 $ 3.08
======== ======== ======== ======== ======== ======== ==========
Cash dividends per common
share........................ $ 0.10 $ 0.10 $ 0.15 $ 0.20 $ 0.25 $ 0.18 $ 0.23
OTHER DATA:
EBITDA(2)...................... $ 82,414 $118,781 $147,340 $204,281 $196,016 $134,122 $ 165,858
Capital expenditures........... 17,212 23,305 48,751 79,300 85,188 65,262 344,335
Long-term debt to total
capitalization (at end of
period)...................... 48.6% 32.7% 35.1% 27.6% 28.0% 30.3% 41.6%
</TABLE>

<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
---------------------------------------------------- ------------
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Net working capital............ $159,408 $161,383 $187,603 $219,345 $242,994 $ 221,532
Total assets................... 757,300 749,120 753,055 801,063 847,923 1,117,368
Long-term debt................. 267,243 171,263 185,274 160,209 176,056 369,404
Shareholders' equity........... 282,511 352,671 343,109 420,022 452,811 517,549
</TABLE>

- ---------------
(1) On December 31, 1997, TXI acquired the 15.7% in Chaparral previously held
by public shareholders.
(2) EBITDA is earnings before interest, income taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to income
from operations or cash flow from operating activities (each determined in
accordance with generally accepted accounting principals).

12
<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in connection with the Company's
audited and unaudited consolidated financial statements and notes thereto
included elsewhere in this Prospectus.

GENERAL

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

The Company owns long-term reserves of limestone, the primary raw material
for the production of cement. The primary raw material for the Company's Steel
operations is recycled steel obtained from crushed automobiles and other
sources. Both the CAC and Steel businesses require large amounts of capital
investment and energy.

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

A significant percentage of the Company's sales of both CAC and Steel
products is attributable to the level of construction activity, which is
affected by general economic conditions and seasonal weather conditions. The
Company's CAC operating profit is generally lower in the fiscal quarter ended
February 28 as compared to the other three fiscal quarters due to the impact of
winter weather conditions on construction activity. Steel results in the fiscal
quarter ended August 31 are affected by the Company's scheduled summer shut-down
to refurbish the production facilities.

13
<PAGE> 15

RESULTS OF OPERATIONS

The following table sets forth certain operating information about the
Company.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED MAY 31, FEBRUARY 28,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
NET SALES
Cement................................................. $115,531 $137,773 $133,256 $ 95,636 $128,190
Ready-mix.............................................. 114,568 154,105 148,861 106,946 140,888
Stone, sand and gravel................................. 64,285 78,198 76,070 55,172 60,463
Other products......................................... 58,615 70,690 79,783 57,284 73,037
Interplant............................................. (54,284) (80,973) (80,822) (58,981) (70,354)
-------- -------- -------- -------- --------
Total CAC.............................................. 298,715 359,793 357,148 256,057 332,224
Structural mills....................................... 359,845 447,115 435,242 308,987 396,529
Bar mill............................................... 167,962 157,130 178,227 128,107 125,389
Other.................................................. 4,004 3,411 3,207 3,785 7,026
-------- -------- -------- -------- --------
Total Steel............................................ 531,811 607,656 616,676 440,879 528,944
-------- -------- -------- -------- --------
Total net sales........................................ 830,526 967,449 973,824 696,936 861,168
OPERATING COST
Operating cost -- CAC.................................. 229,708 269,665 274,100 199,821 257,330
Operating cost -- Steel................................ 488,183 531,880 545,189 392,756 469,431
-------- -------- -------- -------- --------
Total operating cost................................... 717,891 801,545 819,289 592,577 726,761
OPERATING PROFIT
Operating profit -- CAC................................ 69,007 90,128 83,048 56,246 74,894
Operating profit -- Steel.............................. 43,628 75,776 71,487 48,123 59,513
-------- -------- -------- -------- --------
Total operating profit................................. 112,635 165,904 154,535 104,369 134,407
CORPORATE RESOURCES
Selling, general and administrative.................... 15,502 17,168 19,270 13,885 17,683
Depreciation and amortization.......................... 786 823 838 606 684
Other income........................................... (1,651) (7,088) (7,680) (3,265) (4,817)
-------- -------- -------- -------- --------
14,637 10,903 12,428 11,226 13,550
Interest expense......................................... 20,117 19,960 18,885 14,165 14,418
-------- -------- -------- -------- --------
Income before income taxes & minority interest........... $ 77,881 $135,041 $123,222 $ 78,978 $106,439
======== ======== ======== ======== ========
OTHER DATA:
Depreciation and amortization -- CAC................... $ 14,669 $ 15,964 $ 19,918 $ 14,170 $ 18,974
Depreciation and amortization -- Steel................. 33,887 32,493 33,153 26,203 25,343
Capital expenditures -- CAC............................ 27,781 57,628 49,327 38,014 155,653
Capital expenditures -- Steel.......................... 16,234 20,630 33,776 25,590 187,001
Capital expenditures -- corporate resources............ 4,736 1,042 2,085 1,658 1,681
OPERATING DATA:
Units shipped
Cement (tons)........................................ 2,226 2,363 2,082 1,500 1,943
Ready-mix (cubic yards).............................. 2,415 3,088 2,813 2,024 2,617
Stone, sand and gravel (tons)........................ 12,375 15,706 15,501 11,110 12,438
Structural mills (tons).............................. 1,036 1,137 1,095 772 986
Bar mill (tons)...................................... 475 453 525 377 352
Weighted average sales price per unit
Cement (ton)......................................... $ 51.90 $ 58.30 $ 64.00 $ 63.76 $ 65.98
Ready-mix (cubic yards).............................. 47.44 49.90 52.92 52.84 53.84
Stone, sand and gravel (ton)......................... 5.19 4.98 4.91 4.97 4.86
Structural mills (ton)............................... 347.34 393.24 397.48 400.24 402.16
Bars mill (ton)...................................... 353.58 346.87 339.48 339.81 356.22
</TABLE>

NINE-MONTH PERIOD ENDED FEBRUARY 28, 1998 (THE "1998 PERIOD") COMPARED TO
NINE-MONTH PERIOD ENDED FEBRUARY 28, 1997 (THE "1997 PERIOD")

Net sales. Net sales were $861.2 million for the 1998 Period, an increase
of $164.2 million from the 1997 Period.

CAC sales. CAC sales were $332.2 million for the 1998 Period, an increase
of $76.2 million from the 1997 Period, of which $12.0 million was attributable
to Riverside, which was acquired on December 31, 1997. Higher cement sales
resulted from an increase of 19% in shipments from the Company's Texas
operations. The Company's entry into the California regional market through the
acquisition of Riverside contributed to an overall increase in total cement
shipments of 30%. Increased sales in ready-mix and stone, sand and gravel can be
attributed primarily to a return to more favorable weather conditions. Ready-mix
shipments increased 29% in the
14
<PAGE> 16

1998 Period over the 1997 Period. Stone, sand and gravel shipments increased by
12% during the 1998 Period compared to the 1997 Period, while average prices for
these products decreased due to a change in the mix of products sold.

Steel sales. Steel sales were $528.9 million for the 1998 Period, an
increase of $88.1 million from the 1997 Period. Structural steel shipments
increased 28% in the 1998 Period, reflecting sustained demand for structural
products due to the strength in construction activity. Prices for bar mill
products increased 5% in the 1998 Period as a result of an improved product mix
and higher reinforcing bar and specialty bar product prices; these improvements
were somewhat offset by a 7% decrease in shipments.

Operating costs. Cost of products sold, including depreciation, depletion
and amortization, was $683.1 million for the 1998 Period, an increase of $128.2
million from the 1997 Period. CAC costs were $235.4 million, an increase of
$53.9 million compared to the 1997 Period, as a result of increased shipments
and higher maintenance costs at the Texas cement plants and the addition of the
higher operating costs of the Riverside plants. Steel costs were $447.7 million,
an increase of $74.2 million compared to the 1997 Period, resulting from
increased shipments and higher melt shop unit costs.

CAC selling, general and administrative expenses were $23.5 million in the
1998 Period, an increase of $3.6 million from the 1997 Period due primarily to
expanded operations and higher incentive compensation. Steel selling, general
and administration expenses were $25.9 million in the 1998 Period, an increase
of $4.3 million from the 1997 Period, due primarily to increased incentive
compensation.

Operating profit. Operating profit was $134.4 million in the 1998 Period,
an increase of $30.0 million from the 1997 Period. CAC profit was $74.9 million,
an increase of $18.6 million over the 1997 Period due to increased shipments.
Steel profit was $59.5 million, an increase of $11.4 million over the 1997
Period, due primarily to increased structural steel shipments and higher average
selling prices for specialty bar products.

Corporate resources. Selling, general and administrative expenses,
including depreciation and amortization, were $18.4 million for the 1998 Period,
an increase of $3.9 million from the 1997 Period due primarily to increased
incentive compensation expenses and general expenses not allocated to
operations. Other income of $4.8 million for the 1998 Period included $3.3
million from property sales generated by the Company's real estate operations,
an increase of $2.1 million from the 1997 Period property sales.

Interest expense. Interest expense was $14.4 million for the 1998 Period,
net of $2.1 million of capitalized interest.

FISCAL 1997 COMPARED TO FISCAL 1996

Net sales. Net sales for fiscal 1997 were $973.8 million, an increase of
$6.4 million from fiscal 1996.

CAC sales. CAC sales were $357.1 million in fiscal 1997, a decrease of $2.6
million from fiscal 1996 due to lower shipments caused by unusually wet weather.
Average cement pricing increased by 10% in fiscal 1997 over fiscal 1996, while
shipments decreased by 12%. The decrease in ready-mix sales reflected price
increases of 6% in fiscal 1997, offset by a 9% decrease in shipments. The
increase in sales of other products reflected the Company's acquisition of
expanded shale and clay aggregate facilities in California in fiscal 1996.

Steel sales. Steel sales were $616.7 million for fiscal 1997, an increase
of $9.0 million from fiscal 1996, due to higher bar mill shipments which were
partially offset by a decline in structural steel shipments. Bar mill shipments
were 16% higher in fiscal 1997 than fiscal 1996. Specialty bar products
shipments increased 6% in fiscal 1997.

Operating costs. Cost of products sold, including depreciation, depletion
and amortization, was $767.0 million in fiscal 1997, a $10.3 million increase
from fiscal 1996. CAC costs were $249.6 million for fiscal 1997, an increase of
$2.9 million from fiscal 1996, due to higher unit costs for cement manufacturing
and ready-mix distribution, offset by the effect of lower cement shipments.
Steel costs were $517.4 million, an increase of $7.4 million from fiscal 1996
due primarily to increased shipments offset by slightly lower steel rolling
costs per ton.
15
<PAGE> 17

CAC selling, general and administrative expenses were $27.1 million for
fiscal 1997, an increase of $2.5 million from fiscal 1996. Steel selling,
general and administrative expenses were $29.3 million for fiscal 1997, an
increase of $3.1 million from fiscal 1996, primarily due to higher incentive
compensation.

Operating profit. Operating profit was $154.5 million in fiscal 1997, a
decrease of $11.4 million from fiscal 1996. CAC profit was $83.0 million for
fiscal 1997, a decrease of $7.1 million from fiscal 1996, primarily due to
reduced shipments caused by unusually wet weather. Steel profit was $71.5
million in fiscal 1997, a decrease of $4.3 million from fiscal 1996 as improved
margins from increased shipments were offset by higher selling, general and
administrative expenses.

Corporate resources. Selling, general and administrative expenses,
including depreciation and amortization, were $20.1 million for fiscal 1997, an
increase of $2.1 million from fiscal 1996 due to expanded operations, offset by
reduced incentive compensation at the corporate resources level. Other income of
$7.7 million included $6.3 million generated by the Company's real estate
operations during fiscal 1997.

Interest Expense. Interest expense was $18.9 million in fiscal 1997, a
decrease of $1.1 million from fiscal 1996, due to a reduction in the average
outstanding debt.

FISCAL 1996 COMPARED TO FISCAL 1995

Net sales. Net sales for fiscal 1996 were $967.4 million, an increase of
$136.9 million from fiscal 1995.

CAC sales. CAC sales were $359.8 million in fiscal 1996, an increase of
$61.1 million from fiscal 1995 due to continued price improvements and increased
shipments. Average cement pricing increased by 12% in fiscal 1996 and cement
shipments increased by 6%. The increase in ready-mix sales in fiscal 1996
reflected a 28% increase in shipments due to expanded capacity and a 5% increase
in average prices. Stone, sand and gravel sales improved 22% in fiscal 1996,
with an increase in shipments of 27%, while overall average prices decreased 4%
due to a change in the mix of products sold.

Steel sales. Steel sales were $607.7 million in fiscal 1996, an increase of
$75.8 million from fiscal 1995, due to a 9% increase in average selling prices
and an increase in structural steel shipments. Prices for structural steel
products increased 13% in fiscal 1996 compared to fiscal 1995. Bar mill
shipments decreased by 5% in this period with somewhat lower average selling
prices.

Operating costs. Cost of products sold, including depreciation, depletion
and amortization, was $756.7 million in fiscal 1996, an increase of $74.9
million from fiscal 1995. CAC costs were $246.7 million for fiscal 1996, an
increase of $35.7 million from the prior year due to higher shipments. Steel
costs were $510.0 million in fiscal 1996, an increase of $40.6 million over
fiscal 1995, due to higher shipments. Higher scrap, melt shop and steel rolling
costs resulted in a 4% increase in average cost per ton.

CAC selling, general and administrative expenses were $24.7 million for
fiscal 1996, an increase of $3.1 million from fiscal 1995, due to higher
incentive compensation. Steel selling, general and administrative expenses were
$26.2 million for fiscal 1996, an increase of $5.8 million from fiscal 1995,
primarily due to higher incentive compensation.

Operating profit. Operating profit was $165.9 million in fiscal 1996, an
increase of $53.3 million from fiscal 1995. CAC profit was $90.1 million, an
increase of $21.1 million from fiscal 1995 due to increased shipments and higher
prices. Steel profit was $75.8 million in fiscal 1996, an increase of $32.1
million from fiscal 1995, due to increased prices outpacing increased costs.

Corporate resources. Selling, general and administrative expenses were
$18.0 million for fiscal 1996, an increase of $1.7 million from fiscal 1995.

Interest expense. Interest expense was $20.1 million in fiscal 1996, a
decrease of $100,000 from fiscal 1995.

16
<PAGE> 18

LIQUIDITY AND CAPITAL RESOURCES

The Company generally finances its major capital expansion projects with
long-term borrowing. Maintenance capital expenditures and working capital are
funded by cash flow from operations. As a result of the acquisition of
Riverside, the acquisition of the minority interest in Chaparral and the
construction of the Virginia steel facility, the Company has spent or committed
to spend approximately $650 million. The Company expects cash from operations,
the net proceeds from this Offering and borrowings under its revolving credit
facility to be sufficient to provide funds for capital expenditure commitments,
scheduled debt repayments and working capital needs during the next two years.

Net cash provided by operating activities for the 1998 Period was $144.4
million, an increase of $75.9 million over the 1997 Period due to higher net
income, increased depreciation, depletion and amortization expense and changes
in working capital items. During fiscal years 1997, 1996 and 1995, net cash
provided by operating activities was $109.9 million, $127.5 million and $115.9
million, respectively.

Net cash used by investing activities for the 1998 Period was $346.4
million compared to $83.6 million in fiscal 1997, consisting principally of
capital expenditure items. Historically, capital expenditures have consisted of
normal replacement and technological upgrades of existing equipment and
expansion of the Company's operations. The fiscal year 1998 capital expenditure
budget for these activities is estimated to reach $160 million, of which $113.6
million has been incurred during the 1998 Period. Expenditures included the
purchase of expanded shale and clay facilities in Colorado, additional ready-mix
plants in Texas and Louisiana and bar mill upgrades at the Texas steel facility.
Additionally, capital expenditures for the construction of the Company's
Virginia steel facility were $47.9 million for the 1998 Period. Production at
this facility is scheduled to begin in 1999, with total costs for the site,
utilities, equipment and installation estimated to be $450 million, although
there can be no assurance that the facility will commence production on schedule
or that the total cost will not increase. Effective December 31, 1997, the
Company purchased Riverside for $115.4 million, of which $110.9 million had been
paid through February 28, 1998. On December 31, 1997, the Company acquired the
minority interest in Chaparral for an estimated $77.1 million, including
transaction expenses, of which $72.0 million had been paid through February 28,
1998.

Net cash provided by financing activities for the 1998 Period was $186.6
million compared to $34.5 million used in fiscal 1997. Borrowings, net of debt
retirements, increased $193.3 million in the 1998 Period. On December 18, 1997,
the Company concluded the private placement of $200 million in fixed-rate senior
notes having an average maturity of 12 years and average interest rate of 7.28%.
This financing and cash provided by operations funded the Company's increased
capital expenditures for the 1998 Period. In December 1997, the Company
increased the maximum borrowing limit on its revolving credit facility from $100
million to $350 million and extended its term until December 2002. At February
28, 1998, $302.6 million was available for future borrowings thereunder. During
1997, cash provided by operations funded the Company's purchase of $41.6 million
of its Common Stock and Chaparral's purchase of $3.8 million of its common
stock. Effective February 1997, the Company declared a two-for-one stock split
and increased the quarterly cash dividend rate to $.075 per share.

YEAR 2000 COMPLIANCE

The Company is aware of the issues that users of many computer systems will
face as the year 2000 approaches and is in the process of determining Year 2000
compliance in its operating, financial and management information systems. The
Company does not anticipate any material disruption in its operations or
incurrence of material costs as a result of any failure by the Company to be in
compliance.

INFLATION

Management believes that inflation has not had a material effect on the
Company's operations.

17
<PAGE> 19

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This statement establishes new standards for computing and presenting
earnings per share and became effective for financial statements issued for
periods ending after December 15, 1997, including interim periods, and requires
that all prior-period earnings per share data be restated. The Company adopted
SFAS No. 128 for its fiscal quarter ended February 28, 1998.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." These statements are effective for fiscal years beginning
after December 15, 1997, although earlier adoption is permitted. SFAS No. 130
requires the presentation of comprehensive income and its components in a full
set of general purpose financial statements. SFAS No. 131 requires the
disclosure of financial and descriptive information about reportable operating
segments. Both SFAS No. 130 and 131 are modifications of existing disclosure
requirements which will have no effect on the results of operations or financial
condition of the Company.

18
<PAGE> 20

BUSINESS

GENERAL

TXI is a leading supplier of construction materials through two business
segments: cement, aggregate and concrete products; and structural steel and
specialty bar products. The Company is the largest producer of cement in Texas
and the second largest supplier of structural steel products in North America.
Demand for structural steel, cement, aggregate and concrete products is
primarily driven by construction activity, while specialty bar products supply
the original equipment manufacturer ("OEM"), tool and oil country goods markets.
From fiscal 1994 to fiscal 1997, TXI's net sales and net income have grown at a
compound annual rate of 11% and 43%, respectively. For the 12 months ended
February 28, 1998, the Company generated $1.1 billion in net sales and $94.3
million in net income.

In January 1998, the Company acquired Riverside, the owner of a 1.3 million
ton per year portland cement plant and a 100,000 ton per year specialty white
cement plant. The acquisition increased TXI's cement capacity by 60% and opened
the California regional cement market to the Company. TXI is constructing a
structural steel facility in Virginia, scheduled to begin operations in the
summer of 1999, which will expand TXI's steel capacity by approximately 60%. In
March 1998, TXI filed for a permit to expand its Midlothian, Texas, cement plant
from 1.3 to 2.8 million tons per year. The Company is in the planning stages of
modernizing and upgrading its portland cement plant in California.

BUSINESS STRATEGY

The key elements of the Company's strategy are:

Achieve and Maintain Market Leadership. The Company strives to be the
number one or two supplier in desirable markets. The Company is:

- The largest producer of cement in Texas and a major cement producer in
California, the two largest cement markets in the U.S.

- The second largest supplier of structural steel products in North
America.

- The largest supplier of light weight steel beams used in manufactured
housing in North America.

- The largest supplier of expanded shale and clay aggregate products west
of the Mississippi River.

- The largest supplier of stone, sand and gravel aggregate products and the
second largest supplier of ready-mix concrete in North Texas.

- The largest supplier of sand and gravel aggregate products and ready-mix
concrete in Louisiana.

19
<PAGE> 21

- TXI pioneered and is a leader in the manufacture of wide flange beams and
other structural steel products using recycled steel.

- TXI developed and patented near net shape casting, a process which
provides energy and capital cost savings in the making of wide flange
beams and other structural steel products.

- TXI developed and patented the CemStar process, which uses a co-product
from steel-making to increase cement production with little additional
cost. TXI continues to research and refine processes for the recovery and
recycling of waste and the by-products generated by manufacturing
processes.

- TXI continues to develop new, higher-margin products, such as Bantam
Beams and Diamond Pro professional groundskeeping products.

- TXI is a leader in substituting alternative fuels for the nonrenewable
fuels typically used in the energy intensive cement manufacturing
process. The Company lowers cement manufacturing costs both by reducing
expenditures for the nonrenewable fuels and by receiving income for the
management of alternative fuels received from third party generators of
such fuels.

Pursue Strategic Growth Opportunities. The Company pursues profitable
growth by building on its business and operational expertise in order to enter
new markets and introduce new products.

- The acquisition of Riverside provides TXI access to California, the
largest cement market in the U.S. The Company intends to implement its
CemStar process at Riverside in the near term to enhance productivity and
increase capacity. The Company also intends to upgrade and modernize
Riverside's existing portland cement plant with higher capacity and more
cost efficient equipment in order to move into a position of leadership
in the California regional market.

- TXI intends to increase its Midlothian cement capacity from 1.3 million
to 2.8 million tons per year in order to maintain and enhance its
position as the largest producer of cement in Texas.

- TXI is upgrading its specialty bar products capability to further improve
product mix and increase the breadth of markets addressed.

- TXI has embarked on a program to license its CemStar process to cement
producers throughout the world.

- TXI continues to pursue investments for internal growth and opportunistic
acquisitions in order to build on leadership positions in its stone, sand
and gravel, expanded shale and clay and concrete operations.

20
<PAGE> 22

CEMENT

Industry Overview. Cement is the essential binding material used in making
concrete, which is widely used in residential, non-residential and public works
construction activity. Given the high transportation costs of cement relative to
its value, it is typically sold within a 200 mile radius from the producing
plant, with those producers on or near waterways able to transport their product
over substantially greater distances on a cost-effective basis. Consequently,
even cement producers with global operations compete on a regional basis in each
market in which that company manufactures and distributes product. No single
cement company in the U.S. has a production and distribution system extensive
enough to serve all U.S. markets. The ability of a company to compete in a given
market depends largely on the location and operating costs of its plants and
associated distribution terminals, price and service in that market.

Demand for cement is dependent on levels of construction activity specific
to a region or market. Current demand for cement in the Texas and California
regions, as in the rest of the country as a whole, is in excess of current
domestic cement capacity. The Company believes that a continuation of the
current low interest rate environment and increased government spending on
infrastructure improvement, including the enactment of the Intermodal Surface
Transportation Efficiency Act of 1998 ("ISTEA II"), could have a favorable
impact on future demand in its markets. In Texas and California alone, ISTEA II
authorizes the appropriation of approximately 40% greater federal funding over
the next six years for the construction and improvement of highways, bridges and
mass transit systems over the Intermodal Surface Transportation Efficiency Act
of 1992.

TXI's Products. TXI's principal product is portland cement. The Company
also produces specialty cements such as white, masonry, adobe and oil well.

Manufacturing. TXI's cement production facilities are located at four sites
in Texas and California: Midlothian, Texas, south of Dallas/Fort Worth, the
largest cement plant in Texas; Hunter, Texas, south of Austin; and Oro Grande
and Crestmore, California, both near Los Angeles. The limestone reserves used as
the primary raw material are owned by the Company, except for the Crestmore
facility. Raw material for the Crestmore facility is purchased from outside
suppliers. Information regarding each of the Company's facilities is as follows:

<TABLE>
<CAPTION>
ANNUAL RATED
PRODUCTIVE ESTIMATED
CAPACITY -- MANUFACTURING MINIMUM
PLANT (TONS OF CLINKER) PROCESS SERVICE DATE RESERVES -- YEARS
----- ----------------- ------------- ------------ -----------------
<S> <C> <C> <C> <C>
Midlothian, TX............... 1,200,000 Wet 1960 100
Hunter, TX................... 800,000 Dry 1979 100
Oro Grande, CA............... 1,300,000 Dry 1948 90
Crestmore, CA................ 100,000 Dry 1962 N/A
</TABLE>

The Company uses its patented CemStar process in both of its Texas
facilities, which has increased combined annual production by approximately 10%.
The Company intends to add this process to its Oro Grande facility in the near
future. The CemStar process adds "slag," a co-product of steel-making, into a
cement kiln along with the regular raw material feed. The slag serves to
increase the production of clinker which is then ground to make cement. The
primary fuel source for all of the Company's facilities is coal; however, the
Company displaces approximately 35% of its coal needs at its Midlothian plant
and approximately 10% of its coal needs at its Hunter plant by utilizing
alternative fuels.

Raw Materials. The principal raw material used in the production of
portland cement is calcium carbonate in the form of limestone. Limestone is
obtained principally by mining and extracting from the Company's quarries
located in close proximity to its plants.

Marketing and Distribution. The Company markets its products throughout the
southwestern U.S. Its principal marketing area includes the states of Texas,
Louisiana, Oklahoma, California, Nevada, Arizona and Utah. Sales offices are
maintained throughout the marketing area and sales are made primarily to
numerous customers in the construction industry, none of which accounted for
more than 10% of the Company's sales during fiscal 1997.
21
<PAGE> 23

The Company distributes cement from its plants by rail or truck to eight
distribution terminals located throughout its marketing area.

Competition. The cement industry is highly competitive with suppliers
differentiating themselves based on price, service and quality.

AGGREGATE, CONCRETE AND OTHER PRODUCTS

Industry Overview. The construction aggregates business consists of the
mining, extraction, production and sale of stone, sand, gravel and lightweight
aggregates such as expanded shale and clay. Construction aggregates are employed
in virtually all types of construction, including highway construction and
maintenance. The concrete business involves the mixing of cement, sand, gravel,
crushed stone and water to form concrete which is subsequently marketed and
distributed to numerous construction contractors.

Demand for aggregate and concrete products largely depends on regional
levels of construction activity, and therefore tends to follow cycles similar to
those of cement. Both the aggregates and concrete industries are highly
fragmented, with numerous participants operating in localized markets. The cost
of transportation of both aggregate and concrete products is high relative to
their value, and consequently, producers are typically limited to a market area
within 100 miles of their production facilities. Similar to the market for
cement, the Company believes that the current favorable conditions, including
low interest rates, strong regional economies in Texas and California, as well
as the impact of ISTEA II, could lead to increased residential, non-residential
and public works construction activity, fueling the demand for aggregates and
concrete.

TXI's Products. TXI's principal products supplied by these businesses
include stone, sand and gravel, expanded shale and clay, ready-mix concrete,
concrete block and pipe and clay brick.

Manufacturing

Aggregates and Expanded Shale and Clay. The Company's aggregate business,
which includes stone, sand and gravel, and expanded shale and clay, is conducted
from facilities primarily serving the Dallas/Fort Worth, Austin and Houston
areas in Texas, the Alexandria, New Orleans, Baton Rouge and Monroe areas in
Louisiana, the Oakland/San Francisco and Los Angeles areas in California and the
Denver area in Colorado.

Ready-Mix Concrete and Concrete Products. The Company currently operates
46 ready-mix concrete plants and 447 ready-mix trucks in three areas in Texas
(Dallas/Fort Worth/Denton, East Texas and Houston), in northwest, northeast and
central Louisiana and at one location in southern Arkansas.

Raw Materials. Aggregates and expanded shale and clay reserves are either
owned or leased by the Company. The Company manufactures and supplies a
substantial amount of the cement and aggregates used by the ready-mix plants
with the remainder being purchased from outside suppliers.

Marketing and Distribution. Sales of these various products are generally
related to the level of construction activity within close proximity of the
plant location. The cost of transportation limits the marketing of these
products to the areas relatively close to the plant sites. Consequently, sales
of these products are related to the level of construction activity near these
plants. These products are marketed by the Company's sales organization located
in the areas served by the plants and are sold to numerous customers, none of
which would be considered significant to the Company's business. In aggregates
and expanded shale and clay products, the distribution of these products is
provided principally by contract or customer-owned haulers, and a limited amount
of these products is distributed by rail.

Competition. The Company competes with numerous suppliers of aggregate and
concrete products. In most of the Company's markets for these products, the
Company competes with a number of vertically integrated companies. The Company
believes that it is a significant competitor in each of the Texas and Louisiana
aggregate and concrete products markets.

22
<PAGE> 24

STEEL

Industry Overview

Production. There are currently two manufacturing processes utilized in the
production of steel. One process uses recycled steel as its principal raw
material. Companies with this process are generally referred to as recycled
steel-based producers and the steel plants are sometimes referred to as
"mini-mills." The other manufacturing process utilizes the traditional basic
oxygen furnace to make steel from iron ore, and companies with this process are
generally referred to as integrated producers. Recycled steel-based producers
employ electric-arc furnaces to melt recycled steel and typically experience
lower costs of production and higher productivity than integrated producers. As
a result, recycled steel producers have been able to capture large segments of
the steel market from integrated producers.

Structural Products. Structural products include wide flange beams,
standard beams, channels and other shapes that are primarily used in commercial,
retail, industrial, institutional and warehouse construction. Additional markets
include manufactured housing and public works construction. Annual consumption
of structural products in North America is approximately 8.0 million tons. Wide
flange beams, TXI's primary steel product, account for approximately 4.8 million
tons of the total structural products market. Wide flange beam capacity in North
America is currently 3.3 million tons, leaving a capacity shortfall of
approximately 1.5 million tons currently filled by imports.

Bar Products. Bar products consist of reinforcing bar, a commodity product,
and specialty bar products. Specialty bar products serve many applications
including OEM applications, tools and oil country goods. When combined,
specialty bar products currently account for approximately 8.0 million tons of
shipments in the U.S. Tight quality control, particularly when using recycled
steel as a raw material, is required to make these products. As a result,
relatively few recycled steel-based producers specialize in these products and
integrated producers still have a considerable market share.

Reinforcing bar goes into any type of construction that uses concrete. It
is the commodity product of the steel industry and many recycled steel-based
producers make the product. As a result, the market for reinforcing bar is very
regional.

TXI's Products. The Company's structural and bar products include beams
ranging from 4 to 24 inches in width, specialty bar products, reinforcing bar,
channels and merchant bar-quality rounds. The Company's Bantam Beams supply the
manufactured housing industry. On completion of its Virginia steel facility, the
Company's range of beams will increase to 36 inches in width. In addition, North
American and European sheet pile sections, products which are used in
excavation, waterway construction and foundation applications, will be made at
the Virginia facility.

Manufacturing. The Company operates a steel facility at Midlothian, Texas.
The Texas facility has two electric-arc furnaces with continuous casters which
feed two structural rolling mills and one bar rolling mill. The rated annual
capacity of the Texas steel facility is 1.8 million tons of melting and 1.9
million tons of rolling.

The Company has begun construction of a steel manufacturing facility near
Richmond, Virginia with a rated capacity of 1.2 million tons per year. The new
facility will be the first to combine near net shape casting technology with
state-of-the-art melting and rolling technology, providing the widest range of
structural steel products at the lowest cost.

Raw Materials. TXI's primary raw material is recycled steel, with steel
shredded by the Company's shredder currently representing 42% of the raw
material mix. The shredded material is primarily composed of crushed automobile
bodies purchased in the open market. Recycled steel that is not shredded by TXI
is purchased from numerous outside suppliers.

The Company's steel facility consumes large amounts of electricity and
natural gas. Electricity is currently obtained from a local electric utility
under an interruptible supply contract with price adjustments based on the
timing of electricity consumption. Natural gas is obtained from a local gas
utility under a supply contract. The Company believes that adequate supplies of
both electricity and natural gas are readily available.
23
<PAGE> 25

Marketing and Distribution. The Company's products are marketed throughout
the United States and to a limited extent in Canada and Mexico. Sales are
primarily to steel service centers and steel fabricators for use in the
construction industry, as well as to cold finishers, forgers and OEMs for use in
the railroad, defense, automotive, mobile home and energy industries. Finished
products are delivered by Company-owned trucks, common carriers, customer-owned
trucks, rail and barge.

Competition. The Company competes with steel producers, including foreign
producers, on the basis of price, quality and service. Certain of the Company's
foreign and domestic competitors, including both large integrated steel
producers and other recycled steel-based producers, have substantially greater
assets and larger sales organizations.

24
<PAGE> 26

UNDERWRITING

The names of the Underwriters of the shares of Common Stock offered hereby
and the aggregate number of shares which each severally has agreed to purchase
from the Company, subject to the terms and conditions specified in the
Underwriting Agreement, are as follows:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
SBC Warburg Dillon Read Inc.................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................
Morgan Stanley & Co. Incorporated...........................
---------

Total....................................................... 2,900,000
=========
</TABLE>

The Managing Underwriters are SBC Warburg Dillon Read Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated.

If any shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreement
contains certain provisions whereby, if any Underwriter defaults in its
obligation to purchase such shares, and the aggregate obligations of the
Underwriters so defaulting do not exceed 10% of the shares offered hereby, the
remaining Underwriters, or some of them, must assume such obligations.

The shares of Common Stock offered hereby are being initially offered
severally by the Underwriters for sale at the price set forth on the cover page
hereof or at such price less a concession not in excess of $0. per share on
sales to certain dealers. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0. per share on sales to certain
other dealers. The Offering of the shares is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares. After the
public offering, the public offering price, the concession and the reallowance
may be changed by the Managing Underwriters.

The Company has granted to the Underwriters an option, which may be
exercised within 30 days after the date of this Prospectus, to purchase up to an
additional 435,000 shares of Common Stock to cover over-allotments, if any, on
the same terms per share. To the extent the Underwriters exercise this option,
each of the Underwriters will be obligated, subject to certain conditions, to
purchase the number of additional shares of Common Stock proportionate to such
Underwriter's initial commitment.

The Company, and certain of the directors and executive officers of the
Company (who in the aggregate beneficially own 791,590 shares of Common Stock)
have agreed, subject to certain exceptions, that they will not offer, sell,
contract to sell, transfer or otherwise encumber or dispose of any shares of
Common Stock, or securities convertible or exchangeable for shares of Common
Stock, for a period of 90 days after the date of this Prospectus without the
prior written consent of SBC Warburg Dillon Read Inc.

The Managing Underwriters, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Managing Underwriters to reclaim a selling concession
from a syndicate member when the Common Stock originally sold by such syndicate
member is purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Common Stock to be
25
<PAGE> 27

higher than it would otherwise be in the absence of such transactions. These
transactions may be effected on the NYSE or otherwise and, if commenced, may be
discontinued at any time.

The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended (the "Securities Act"),
or to contribute to payments that the Underwriters may be required to make in
respect thereof.

From time to time in the ordinary course of their respective businesses,
certain of the Underwriters and/or their affiliates have provided, and may
provide in the future, various investment banking, general financing and banking
and other services to the Company for which they have received and may receive
customary fees and commissions.

LEGAL MATTERS

The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Locke Purnell Rain Harrell (A Professional
Corporation), Dallas, Texas. Certain legal matters will be passed upon for the
Underwriters by Gibson, Dunn & Crutcher LLP, New York, New York.

EXPERTS

The Consolidated Financial Statements of Texas Industries, Inc. as of May
31, 1995, 1996 and 1997, and for each of the three fiscal years then ended,
appearing in this Prospectus and the registration statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), through the Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR"), a registration statement on Form S-3 under the Securities Act
with respect to the Common Stock offered hereby (the "Registration Statement").
This Prospectus, filed as part of the Registration Statement, does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto, certain portions of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is hereby
made to the Registration Statement and the exhibits and schedules filed
therewith or incorporated by reference thereto. Statements contained in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete and in each such instance, reference is made to the
copy of such contract, agreement or other document filed as an exhibit to the
Registration Statement, including documents incorporated by reference, for a
more complete description of the matters involved and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge and copied at the offices of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained at the
prescribed rates from the Commission's Public Reference Section at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Electronic
registration statements filed through EDGAR may also be accessed electronically
through the Commission's home page on the World Wide Web at http://www.sec.gov.

The Company is subject to the periodic reporting requirements of the
Exchange Act, and in accordance therewith, it files reports, proxy statements
and other information required thereby with the Commission via EDGAR. Copies of
such material may be inspected and copied at the offices of the Commission and
accessed electronically through the Commission's home page on the World Wide
Web. Reports, proxy statements, other required information statements and other
information concerning the Company may also be inspected at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
26
<PAGE> 28

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents have been filed by the Company with the Commission
and are incorporated herein by reference:

1. Annual Report on Form 10-K for the fiscal year ended May 31, 1997.

2. Quarterly Report on Form 10-Q for the quarter ended August 31, 1997.

3. Quarterly Report on Form 10-Q for the quarter ended November 30, 1997.

4. Quarterly Report on Form 10-Q for the quarter ended February 28, 1998.

5. Current Report on Form 8-K dated July 30, 1997.

6. Current Report on Form 8-K dated September 16, 1997.

7. Current Report on Form 8-K dated January 26, 1998.

8. Proxy Statement for the Annual Meeting of Stockholders held on October
21, 1997.

9. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form S-3 No. 2-80855) dated January 13, 1973.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering of the Common Stock hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to the Director-Investor
Relations, of the Company at Texas Industries, Inc., 1341 West Mockingbird Lane,
Dallas, Texas 75247-6913.

27
<PAGE> 29

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 30

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets at May 31, 1997 and 1996........ F-3
Consolidated Statements of Income for the years ended May
31, 1997, 1996 and 1995................................... F-4
Consolidated Statements of Cash Flows for the years ended
May 31, 1997, 1996 and 1995............................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended May 31, 1997, 1996, 1995 and 1994............. F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Balance Sheets at February 28, 1998 (Unaudited)
and May 31, 1997.......................................... F-14
Consolidated Statements of Income (Unaudited) for the three
months ended February 28, 1998 and 1997 and the nine
months ended February 28, 1998 and 1997................... F-15
Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended February 28, 1998 and 1997.............. F-16
Notes to Consolidated Financial Statements (Unaudited)...... F-17
</TABLE>

F-1
<PAGE> 31

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Texas Industries, Inc.

We have audited the accompanying consolidated balance sheets of Texas
Industries, Inc. and subsidiaries as of May 31, 1997 and 1996, and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the three years in the period ended May 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Texas
Industries, Inc. and subsidiaries at May 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended May 31, 1997, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Dallas, Texas
July 8, 1997

F-2
<PAGE> 32

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MAY 31,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 19,834 $ 28,055
Notes and accounts receivable............................. 122,783 113,762
Inventories............................................... 167,146 150,526
Prepaid expenses.......................................... 34,613 32,574
-------- --------
TOTAL CURRENT ASSETS.............................. 344,376 324,917
OTHER ASSETS
Real estate and other investments......................... 14,920 19,751
Goodwill and other intangibles............................ 63,297 60,377
Other..................................................... 26,553 20,713
-------- --------
104,770 100,841
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements................................ 118,248 110,836
Buildings................................................. 66,156 60,610
Machinery and equipment................................... 815,019 766,434
-------- --------
999,423 937,880
Less allowances for depreciation.......................... 600,646 562,575
-------- --------
398,777 375,305
-------- --------
$847,923 $801,063
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable.................................... $ 51,021 $ 56,652
Accrued interest, wages and other items................... 36,909 35,446
Current portion of long-term debt......................... 13,452 13,474
-------- --------
TOTAL CURRENT LIABILITIES......................... 101,382 105,572
LONG-TERM DEBT.............................................. 176,056 160,209
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS............. 80,080 80,139
MINORITY INTEREST........................................... 37,594 35,121
SHAREHOLDERS' EQUITY
Common stock, $1 par value................................ 25,067 12,534
Additional paid-in capital................................ 255,149 266,303
Retained earnings......................................... 262,774 193,929
Cost of common shares in treasury......................... (90,179) (52,744)
-------- --------
452,811 420,022
-------- --------
$847,923 $801,063
======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 33

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C>
NET SALES................................................... $973,824 $967,449 $830,526
COSTS AND EXPENSES (INCOME)
Cost of products sold..................................... 767,030 756,715 681,824
Selling, general and administrative....................... 76,535 68,852 58,275
Interest.................................................. 18,885 19,960 20,117
Other income.............................................. (11,848) (13,119) (7,571)
-------- -------- --------
850,602 832,408 752,645
-------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS.................... 123,222 135,041 77,881
Income taxes................................................ 41,189 47,256 25,700
-------- -------- --------
82,033 87,785 52,181
Minority interest in Chaparral.............................. (6,559) (7,831) (4,164)
-------- -------- --------
NET INCOME........................................ $ 75,474 $ 79,954 $ 48,017
======== ======== ========
Average common shares....................................... 22,243 22,742 24,851
Net income per common share................................. $ 3.40 $ 3.52 $ 1.94
======== ======== ========
Cash dividends.............................................. $ .25 $ .20 $ .15
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 34

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------
1997 1996 1995
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 75,474 $ 79,954 $ 48,017
Loss (gain) on disposal of assets........................ 2,131 977 (1,994)
Non-cash items
Depreciation, depletion and amortization.............. 53,909 49,280 49,342
Deferred taxes........................................ 683 6,822 5,434
Undistributed minority interest....................... 5,684 6,771 3,028
Other -- net.......................................... 6,367 6,454 4,798
Changes in operating assets and liabilities
Notes and accounts receivable......................... (12,570) (13,417) (22,608)
Inventories and prepaid expenses...................... (22,607) (22,921) 10,781
Accounts payable and accrued liabilities.............. (3,552) 3,637 17,935
Real estate and investments........................... 4,380 9,906 1,131
-------- --------- --------
Net cash provided by operations.................. 109,899 127,463 115,864
INVESTING ACTIVITIES
Capital expenditures..................................... (85,188) (79,300) (48,751)
Proceeds from disposition of assets...................... 5,281 1,799 3,132
Other -- net............................................. (3,733) (3,154) (1,456)
-------- --------- --------
Net cash used by investing....................... (83,640) (80,655) (47,075)
FINANCING ACTIVITIES
Repayments of short-term borrowing....................... -- -- (15,000)
Proceeds of long-term borrowing.......................... 69,206 97,552 50,485
Debt retirements......................................... (53,392) (126,593) (50,127)
Purchase of treasury shares.............................. (41,572) (417) (54,688)
Purchase of Chaparral stock.............................. (3,770) (12,506) --
Dividends paid........................................... (5,361) (4,451) (3,618)
Other -- net............................................. 409 1,674 (1,619)
-------- --------- --------
Net cash used by financing....................... (34,480) (44,741) (74,567)
-------- --------- --------
Increase (decrease) in cash................................ (8,221) 2,067 (5,778)
Cash at beginning of year.................................. 28,055 25,988 31,766
-------- --------- --------
Cash at end of year........................................ $ 19,834 $ 28,055 $ 25,988
======== ========= ========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 35

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON
STOCK ADDITIONAL TREASURY TOTAL
PREFERRED $1 PAR PAID-IN RETAINED COMMON SHAREHOLDERS'
STOCK VALUE CAPITAL EARNINGS STOCK EQUITY
--------- ------- ---------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
May 31, 1994............................ $ 598 $12,534 $265,790 $ 75,511 $ (1,762) $352,671
Net income............................ 48,017 48,017
Cash dividends
Preferred stock -- $5 a share...... (30) (30)
Common stock -- $.15 a share....... (3,588) (3,588)
Treasury stock issued for bonuses and
options -- 40,508 shares........... 255 (323) 795 727
Treasury stock purchased -- 2,996,956
shares............................. (54,688) (54,688)
----- ------- -------- -------- -------- --------
May 31, 1995............................ 598 12,534 266,045 119,587 (55,655) 343,109
Net income............................ 79,954 79,954
Cash dividends
Preferred stock -- $4.72 a share... (28) (28)
Common stock -- $.20 a share....... (4,423) (4,423)
Treasury stock issued for bonuses and
options -- 194,628 shares.......... 288 (1,161) 3,328 2,455
Treasury stock purchased -- 15,696
shares............................. (417) (417)
Retirement of preferred stock......... (598) (30) (628)
----- ------- -------- -------- -------- --------
May 31, 1996............................ -- 12,534 266,303 193,929 (52,744) 420,022
Net income............................ 75,474 75,474
Cash dividends
Common stock -- $.25 a share....... (5,361) (5,361)
Shares issued under two-for-one
stock split........................ 12,533 (12,533) --
Treasury stock issued for bonuses and
options -- 262,497 shares.......... 1,379 (1,268) 4,137 4,248
Treasury stock purchased -- 1,566,554
shares............................. (41,572) (41,572)
----- ------- -------- -------- -------- --------
May 31, 1997............................ $ -- $25,067 $255,149 $262,774 $(90,179) $452,811
===== ======= ======== ======== ======== ========
</TABLE>

At May 31, 1997, Common Stock and Additional Paid-in Capital include $127.8
million of accumulated transfers from Retained Earnings in connection with stock
dividends.

See notes to consolidated financial statements.

F-6
<PAGE> 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Texas Industries, Inc. (the Company or TXI), through its subsidiaries, is a
producer of steel and cement/concrete products for the construction and
manufacturing industries. Chaparral Steel Company (Chaparral) produces beam,
merchant and special bar quality rounds, reinforcing bars and channels,
primarily for markets in North America and, under certain market conditions,
Europe and Asia. Cement/concrete operations supply cement and aggregates,
ready-mix, pipe, block and brick from facilities concentrated primarily in Texas
and Louisiana, with several products marketed throughout the U.S.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Property, Plant and Equipment: Property, plant and equipment is recorded at
cost. Provisions for depreciation are computed generally using the straight-line
method. Provisions for depletion of mineral deposits are computed on the basis
of the estimated quantity of recoverable raw materials.

Cash Equivalents: For cash flow purposes, temporary investments which have
maturities of less than 90 days when purchased are considered cash equivalents.

Earnings Per Share: Earnings per share are computed by deducting preferred
dividends from net income and adjusting for amortization of additional goodwill
in connection with the contingent payment for the acquisition of Chaparral, then
dividing this amount by the weighted average number of common shares outstanding
during the period, including common stock equivalents. Earnings per share and
all other common share information have been adjusted to give effect to the
two-for-one stock split in February 1997.

Statement of Financial Accounting Standards No. 128 "Earnings per Share"
(SFAS 128), which is not effective until December 15, 1997, will change the
method currently used to compute earnings per share and require the restatement
of all prior periods. The impact is expected to result in an increase in basic
earnings per share over primary earnings per share of $.08, $.09 and $.02, for
the fiscal years ended 1997, 1996 and 1995, respectively.

Intangible Assets: Goodwill and other intangibles is presented net of
accumulated amortization of $17.9 million at May 31, 1997 and $15.0 million at
May 31, 1996. Goodwill resulting from the acquisition of Chaparral of $57.2
million at May 31, 1997 and $59.2 million at May 31, 1996 (net of accumulated
amortization), is being amortized currently on a straight-line basis over a
40-year period. Other intangibles consisting primarily of goodwill and
non-compete agreements are being amortized on a straight-line basis over periods
of 2 to 15 years. Management reviews remaining goodwill and other intangibles
with consideration toward recovery through future operating results
(undiscounted) at the current rates of amortization.

Commissioning Costs: The Company's policy for new facilities is to
capitalize certain costs until the facility is substantially complete and ready
for its intended use. Chaparral substantially completed its large beam mill
during the third quarter of fiscal 1992. Deferred costs totaling $15.1 million
were amortized over a five-year period. The annual amount of amortization
charged to income was $2.0 million in 1997 and $3.0 million in 1996 and 1995.

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

F-7
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Financial Instruments: The estimated fair value of each class of financial
instrument as of May 31, 1997 approximates carrying value except for Chaparral's
long-term debt. The fair value of long-term debt at May 31, 1997, estimated by
applying discounted cash flow analysis based on interest rates currently
available to the Company for such debt with similar terms and remaining
maturities, is approximately $198.2 million compared to the carrying amount of
$189.5 million.

Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform to the 1997 presentation.

WORKING CAPITAL

Working capital totaled $243.0 million at May 31, 1997, compared to $219.3
million at the prior year-end.

Notes and accounts receivable of $122.8 million at May 31, 1997, compared
with $113.8 million in 1996, are presented net of allowances for doubtful
receivables of $2.5 million in 1997 and $3.1 million in 1996.

Inventories are stated at cost (not in excess of market) generally using
the last-in, first-out method (LIFO). If the average cost method (which
approximates current replacement cost) had been used, inventory values would
have been higher by $11.7 million in 1997 and $14.2 million in 1996.

Inventories are summarized as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished products........................................... $ 77,021 $ 64,347
Work in process............................................. 27,162 23,345
Raw materials and supplies.................................. 62,963 62,834
-------- --------
$167,146 $150,526
======== ========
</TABLE>

LONG-TERM DEBT

Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bank obligations, maturing through 2001, interest rates from $ 40,000 $ 9,000
6.31% to 6.38% (.625% over LIBOR).........................
Senior notes due through 2008, interest rates average 75,000 75,000
7.28%.....................................................
Senior notes of Chaparral, due through 2004, interest rates 56,000 64,000
average 10.2%.............................................
First mortgage notes of Chaparral, due through 1999, 8,182 14,320
interest rate 14.2%.......................................
Pollution control bonds, due through 2007, interest rate 7,935 8,615
6.38% (75% of prime)......................................
Other, maturing through 2005, interest rates from 8% to 2,391 2,748
10%.......................................................
-------- --------
189,508 173,683
Less current maturities..................................... 13,452 13,474
-------- --------
$176,056 $160,209
======== ========
</TABLE>

Annual maturities of long-term debt for each of the five succeeding years
are $13.5, $13.3, $9.0, $8.9 and $48.7 million.

The Company has available a bank-financed $100 million long-term line of
credit. In addition to the $40 million currently outstanding under this line,
$8.9 million has been utilized to support letters of credit. Commitment fees at
a current annual rate of .22% are paid on the unused portion of this line. In
addition, Chaparral has available a bank-financed $10 million short-term line of
credit which will expire December 31,

F-8
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1997, if not renewed. The interest chargeable on borrowings under this line is
.375% over LIBOR. Commitment fees at an annual rate of .125% are paid on the
unused portion of this line.

Loan agreements contain covenants which provide for minimum working
capital, restrictions on purchases of treasury stock and payment of dividends on
common stock, and limitations on incurring certain indebtedness and making
certain investments. Under the most restrictive of these agreements, the
aggregate amount of annual cash dividends on common stock is limited based on
the ratio, excluding Chaparral, of earnings before interest, taxes, depreciation
and amortization plus dividends from Chaparral to fixed charges. In addition,
Chaparral loan agreements restrict dividends and advances to its shareholders,
including the parent company, to $52 million as of May 31, 1997. The Company and
Chaparral are in compliance with all loan covenant restrictions.

Property, plant and equipment, principally Chaparral's, carried at a net
amount of approximately $215.4 million at May 31, 1997 is mortgaged as
collateral for $9.4 million of secured debt.

The amount of interest paid was $19.3 million in 1997, $18.9 million in
1996 and $18.4 million in 1995. Interest capitalized totalled $190,000 in 1997.

SHAREHOLDERS' EQUITY

Common stock consists of:

<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Shares authorized........................................... 40,000 40,000
Shares outstanding at May 31................................ 20,896 22,200
Average shares outstanding including equivalents............ 22,243 22,742
Shares held in treasury..................................... 4,171 2,867
Shares reserved for stock options and other................. 2,163 2,422
</TABLE>

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. On March 29, 1996 the Company redeemed and retired all outstanding
shares of such $5 Cumulative Preferred Stock. An additional 25,000 shares are
designated Series B Junior Participating Preferred Stock. The Series B Preferred
Stock is not redeemable and ranks, with respect to the payment of dividends and
the distribution of assets, junior to (i) all other series of the Preferred
Stock unless the terms of any other series shall provide otherwise and (ii) the
$5 Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996,
the Company distributed a dividend of one preferred share purchase right for
each outstanding share of the Company's Common Stock. Each right entitles the
holder to purchase from the Company one two-thousandth of a share of the Series
B Junior Participating Preferred Stock at a price of $122.50 per one
two-thousandth share of Series B Preferred Stock, subject to adjustment. The
rights will expire on November 1, 2006 unless the date is extended or the rights
are earlier redeemed or exchanged by the Company pursuant to the Rights
Agreement.

STOCK OPTION PLANS

The Company's stock option plans provide that non-qualified and incentive
stock options to purchase Common Stock may be granted to directors, officers and
key employees at market prices at date of grant. Generally, options become
exercisable in installments beginning one or two years after date of grant and
expire six or ten years later depending on the initial date of grant. The
Company has elected to continue utilizing the accounting prescribed by APB No.
25 for stock issued under these plans and therefore no compensation cost has
been recognized. If compensation cost had been determined based on the fair
value at the date of grant consistent with the method prescribed by Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-

F-9
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Based Compensation" (SFAS No. 123), the Company's net income and earnings per
share would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Net income
As reported............................................... 75,474 79,954
Pro forma................................................. 74,272 79,548
Primary earnings per share
As reported............................................... 3.40 3.52
Pro forma................................................. 3.36 3.51
</TABLE>

Because the method of accounting under SFAS No. 123 has not been applied to
options granted prior to June 1, 1995 the pro forma compensation cost may not be
representative of that to be expected in future years.

The fair value of each option grant is estimated on the date of grant for
purposes of the pro forma disclosures using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants made in
1997 and 1996, respectively: dividend yield of 1.05% and .89%, expected
volatility of 24% and 24%; risk-free interest rates of 6.38% and 6.15% and
expected lives of 6.4 and 6.4 years.

A summary of option transactions for the two years ended May 31, 1997
follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES UNDER OPTION OPTION PRICE
---------------------- ----------------
1997 1996 1997 1996
--------- --------- ------ ------
<S> <C> <C> <C> <C>
Outstanding at June 1.............................. 1,232,598 1,096,882 $15.98 $12.70
Granted.......................................... 809,200 374,400 26.96 22.74
Exercised........................................ (234,067) (192,444) 10.35 11.05
Cancelled........................................ (10,600) (46,240) 22.66 13.45
--------- --------- ------ ------
Outstanding at May 31.............................. 1,797,131 1,232,598 $21.62 $15.98
Options exercisable at May 31...................... 347,491 329,918 $15.18 $11.04
Weighted-average fair value of options granted
during the year.................................. $ 9.46 $ 7.98
</TABLE>

As of May 31, 1997, the 1.8 million option shares outstanding have an
exercise price between $10.19 and $32.54 and a weighted-average remaining life
of 8.0 years. In addition, 240,440 shares were available for future grants.

INCOME TAXES

The Company made income tax payments of $39.5 million, $38.7 million, and
$19.7 million in 1997, 1996 and 1995, respectively.

The provisions for income taxes are composed of:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current..................................................... $40,506 $40,434 $20,266
Deferred.................................................... 683 6,822 5,434
------- ------- -------
Expense..................................................... $41,189 $47,256 $25,700
======= ======= =======
</TABLE>

F-10
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconcilement from statutory federal taxes to the above provisions
follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Taxes at statutory rate............................... $43,127 $47,267 $27,258
Tax credit carryforwards.............................. -- -- (333)
Additional depletion.................................. (2,984) (2,707) (2,352)
Goodwill.............................................. 702 702 809
State income tax...................................... 912 1,905 552
Non taxable insurance benefits........................ (664) (561) (502)
Other -- net.......................................... 96 653 268
------- ------- -------
$41,189 $47,256 $25,700
======= ======= =======
</TABLE>

The components of the net deferred tax liability at May 31 are summarized
below:

<TABLE>
<CAPTION>
1997 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Deferred compensation..................................... $ 5,523 $ 4,732
Expenses not currently tax deductible..................... 8,332 9,496
Tax cost in inventory..................................... 586 3,698
------- --------
Total deferred tax assets......................... 14,441 17,926
Deferred tax liabilities
Accelerated tax depreciation.............................. 64,154 65,481
Deferred real estate gains................................ 5,178 5,672
Commissioning costs....................................... -- 704
Other..................................................... 1,526 1,803
------- --------
Total deferred tax liabilities.................... 70,858 73,660
------- --------
Net tax liability........................................... 56,417 55,734
Less current portion (asset)................................ (6,236) (10,175)
------- --------
Net deferred tax liability.................................. $62,653 $ 65,909
======= ========
</TABLE>

LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES

The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial
compliance with applicable environmental laws and regulations. Notwithstanding
such compliance, if damage to persons or property or contamination of the
environment has been or is caused by the conduct of the Company's business or by
hazardous substances or wastes used in, generated or disposed of by the Company,
the Company may be held liable for such damages and be required to pay the cost
of investigation and remediation of such contamination. The amount of such
liability could be material. Changes in federal or state laws, regulations or
requirements or discovery of unknown conditions could require additional
expenditures by the Company.

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

RETIREMENT PLANS

Substantially all employees of the Company are covered by a series of
defined contribution retirement plans. The amount of pension expense charged to
costs and expenses for the above plans was $3.4 million in 1997,

F-11
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$2.9 million in 1996 and $2.6 million in 1995. It is the Company's policy to
fund the plans to the extent of charges to income.

INCENTIVE PLANS

All personnel employed as of May 31 share in the pretax income of the
Company for the year then ended based on predetermined formulas. The duration of
most of the plans is one year; certain executives are additionally covered under
a three-year plan. All plans are subject to annual review by the Company's Board
of Directors. The expense for these plans, included in selling, general and
administrative, was $14.8 million, $15.1 million and $8.9 million for 1997, 1996
and 1995, respectively.

Certain executives of Chaparral participate in a deferred compensation plan
based on a five-year average of earnings. Amounts recorded as expense
(reduction) under the plan were $1.9 million, $.7 million and $(.1) million for
1997, 1996 and 1995, respectively.

OPERATING LEASES

Total expense for operating leases for mobile equipment, office space and
other items (other than for mineral rights) amounted to $17.2 million in 1997,
$16.4 million in 1996 and $12.0 million in 1995. Non-cancelable operating leases
with an initial or remaining term of more than one year totaled $61.2 million at
May 31, 1997. Annual lease payments for the five succeeding years are $15.2
million, $8.8 million, $8.6 million, $8.0 million and $6.6 million.

BUSINESS SEGMENTS

Business segment information is presented on pages 9 and 10. Intersegment
sales, which are not material, are accounted for at prices comparable to normal
trade customer sales. Operating profit is net sales less operating costs and
expenses, excluding general corporate expenses and interest expense.
Identifiable assets by segment are those assets that are used in the Company's
operation in each segment. Corporate assets consist primarily of cash, real
estate subsidiaries and other financial assets not identified with a major
business segment.

F-12
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of quarterly financial information (in thousands
except per share):

<TABLE>
<CAPTION>
AUGUST NOVEMBER FEBRUARY MAY
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1997
- ------------------------------------------------
Net Sales
Steel......................................... $149,527 $143,637 $147,715 $175,797
Cement/concrete............................... 96,415 90,739 68,903 101,091
-------- -------- -------- --------
245,942 234,376 216,618 276,888
======== ======== ======== ========
Operating profit
Steel......................................... 15,508 14,754 17,861 23,364
Cement/concrete............................... 25,513 22,557 8,176 26,802
-------- -------- -------- --------
41,021 37,311 26,037 50,166
======== ======== ======== ========
Net income...................................... 19,884 17,903 10,126 27,561
Per share
Net income*................................... .87 .79 .47 1.29
Dividends..................................... .05 .05 .075 .075
Stock price
High....................................... 34 5/16 33 7/16 29 5/16 29 1/4
Low........................................ 31 5/16 26 15/16 24 1/8 20 7/8
1996
- ------------------------------------------------
Net Sales
Steel......................................... $138,141 $154,990 $158,954 $155,571
Cement/concrete............................... 93,963 89,271 76,086 100,473
-------- -------- -------- --------
232,104 244,261 235,040 256,044
======== ======== ======== ========
Operating profit
Steel......................................... 13,346 19,892 21,173 21,365
Cement/concrete............................... 24,844 21,903 13,685 29,696
-------- -------- -------- --------
38,190 41,795 34,858 51,061
======== ======== ======== ========
Net income...................................... 17,131 21,452 16,004 25,367
Per share
Net income.................................... .76 .95 .70 1.11
Dividends..................................... .05 .05 .05 .05
Stock price
High....................................... 24 7/8 27 5/8 31 1/8 34 5/8
Low........................................ 17 13/16 23 1/4 25 1/8 30 1/4
</TABLE>

- ---------------

* The sum of these amounts does not equal the annual amount because of changes
in the average number of common equity shares outstanding during the year.

MERGER PROPOSAL

On May 22, 1997, the Company made an offer to merge with Chaparral Steel
Company. Of the approximately 28.4 million shares of Chaparral outstanding at
May 31, 1997, the Company owns 24.0 million shares with the balance of the
outstanding shares publicly traded on the New York Stock Exchange. Under the
terms of the offer, owners of the publicly traded shares of Chaparral would
receive consideration of $14.25 per share.

F-13
<PAGE> 43

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
FEBRUARY 28, MAY 31,
1998 1997
------------ --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 4,428 $ 19,834
Notes and accounts receivable............................. 152,079 122,783
Inventories............................................... 166,571 167,146
Prepaid expenses.......................................... 45,467 34,613
---------- --------
TOTAL CURRENT ASSETS.............................. 368,545 344,376
OTHER ASSETS
Real estate and other investments......................... 13,301 14,920
Goodwill and other intangibles............................ 155,081 63,297
Other..................................................... 33,110 26,553
---------- --------
201,492 104,770
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements................................ 133,298 118,248
Buildings................................................. 68,199 66,156
Machinery and equipment................................... 979,092 815,019
---------- --------
1,180,589 999,423
Less allowances for depreciation.......................... 633,258 600,646
---------- --------
547,331 398,777
---------- --------
$1,117,368 $847,923
========== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable.................................... $ 90,010 $ 51,021
Accrued interest, wages and other items................... 43,573 36,909
Current portion of long-term debt......................... 13,430 13,452
---------- --------
TOTAL CURRENT LIABILITIES......................... 147,013 101,382
LONG-TERM DEBT.............................................. 369,404 176,056
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS............. 83,402 80,080
MINORITY INTEREST........................................... -- 37,594
SHAREHOLDERS' EQUITY
Common stock, $1 par value................................ 25,067 25,067
Additional paid-in capital................................ 255,149 255,149
Retained earnings......................................... 324,605 262,774
Cost of common shares in treasury......................... (87,272) (90,179)
---------- --------
517,549 452,811
---------- --------
$1,117,368 $847,923
========== ========
</TABLE>

See notes to consolidated financial statements.

F-14
<PAGE> 44

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
NET SALES.......................................... $281,421 $216,618 $861,168 $696,936
COSTS AND EXPENSES (INCOME)
Cost of products sold............................ 228,074 178,129 683,116 554,956
Selling, general and administrative.............. 23,752 17,431 67,798 56,006
Interest......................................... 6,205 4,852 14,418 14,165
Other income..................................... (5,059) (1,824) (10,603) (7,169)
-------- -------- -------- --------
252,972 198,588 754,729 617,958
-------- -------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS........ 28,449 18,030 106,439 78,978
Income taxes....................................... 9,201 6,330 35,252 26,767
-------- -------- -------- --------
19,248 11,700 71,187 52,211
Minority interest in Chaparral..................... (620) (1,574) (4,400) (4,298)
-------- -------- -------- --------
NET INCOME............................... $ 18,628 $ 10,126 $ 66,787 $ 47,913
======== ======== ======== ========
BASIC
Average shares................................... 21,135 21,418 21,066 22,012
Earnings per share............................... $ .88 $ .48 $ 3.18 $ 2.18
======== ======== ======== ========
DILUTED
Average shares................................... 21,912 21,786 21,717 22,457
Earnings per share............................... $ .85 $ .47 $ 3.08 $ 2.14
======== ======== ======== ========
Cash dividends..................................... $ .075 $ .075 $ .225 $ .175
======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-15
<PAGE> 45

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28,
---------------------
1998 1997
--------- --------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 66,787 $ 47,913
Loss on disposal of assets................................ 611 186
Non-cash items
Depreciation, depletion and amortization............... 45,001 40,979
Deferred taxes......................................... (1,538) (2,331)
Undistributed minority interest........................ 4,177 3,643
Other -- net........................................... 5,601 4,182
Changes in operating assets and liabilities
Notes and accounts receivable.......................... (12,537) 2,226
Inventories and prepaid expenses....................... 6,305 (27,075)
Accounts payable and accrued liabilities............... 28,126 (4,002)
Real estate and investments............................ 1,834 2,742
--------- --------
Net cash provided by operations................... 144,367 68,463
INVESTING ACTIVITIES
Purchase of Riverside Cement Company...................... (110,916) --
Chaparral merger.......................................... (71,970) --
Capital expenditures -- Virginia steel facility........... (47,881) --
Capital expenditures -- other............................. (113,568) (65,262)
Proceeds from disposal of assets.......................... 2,282 1,426
Other -- net.............................................. (4,300) (2,316)
--------- --------
Net cash used by investing........................ (346,353) (66,152)
FINANCING ACTIVITIES
Proceeds from long-term borrowing......................... 267,639 53,206
Debt retirements.......................................... (74,324) (28,726)
Purchase of treasury shares............................... (558) (41,572)
Purchase of Chaparral stock............................... -- (3,770)
Dividends paid............................................ (4,721) (3,794)
Other -- net.............................................. (1,456) (1,707)
--------- --------
Net cash provided (used) by financing............. 186,580 (26,363)
--------- --------
Decrease in cash............................................ (15,406) (24,052)
Cash at beginning of period................................. 19,834 28,055
--------- --------
Cash at end of period....................................... $ 4,428 $ 4,003
========= ========
</TABLE>

See notes to consolidated financial statements.

F-16
<PAGE> 46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Texas Industries, Inc. (the Company or TXI), through its subsidiaries, is a
producer of steel and cement, aggregate and concrete products for the
construction and manufacturing industries. Chaparral Steel Company (Chaparral)
produces beams, merchant and special bar quality rounds, reinforcing bars and
channels, primarily for markets in North America and, under certain market
conditions, Europe and Asia. Cement, aggregate and concrete operations supply
cement and aggregates, ready-mix, pipe, block and brick from facilities
concentrated primarily in Texas, Louisiana, and California with several products
marketed throughout the U.S.

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 with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended February 28,
1998, are not necessarily indicative of the results that may be expected for the
year ended May 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended May 31, 1997.

Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and all subsidiaries. The minority interest
represents the separate public ownership of Chaparral which was acquired by the
Company on December 31, 1997. Certain amounts in the prior period financial
statements have been reclassified to conform to the current period presentation.

Cash Equivalents: For cash flow purposes, temporary investments which have
maturities of less than 90 days when purchased are considered cash equivalents.

Earnings Per Share: Effective February 28, 1998, the Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS
128). SFAS 128 prescribes new calculations for Basic and Diluted Earnings Per
Share (EPS) which replaces the former calculations for Primary and Fully Diluted
EPS and requires the restatement of prior period EPS data.

Basic EPS is computed by adjusting net income for the amortization of
additional goodwill in connection with a contingent payment for the acquisition
of Chaparral, then dividing by the weighted average number of common shares
outstanding during the period including contingently issuable shares. Diluted
EPS also adjusts the outstanding shares for the dilutive effect of stock options
and awards.

F-17
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

Basic and Diluted EPS are calculated as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
Earnings:
Net income........................................ $18,628 $10,126 $66,787 $47,913
Contingent price amortization..................... 58 58 174 174
------- ------- ------- -------
$18,686 $10,184 $66,961 $48,087
======= ======= ======= =======
Shares:
Weighted average shares outstanding............... 21,034 21,337 20,969 21,923
Contingently issuable shares...................... 101 81 97 89
------- ------- ------- -------
21,135 21,418 21,066 22,012
Stock option and award dilution................... 777 368 651 445
------- ------- ------- -------
21,912 21,786 21,717 22,457
======= ======= ======= =======
Basic earnings per share............................ $ .88 $ .48 $ 3.18 $ 2.18
======= ======= ======= =======
Diluted earnings per share.......................... $ .85 $ .47 $ 3.08 $ 2.14
======= ======= ======= =======
</TABLE>

Intangible Assets: Goodwill and other intangibles is presented net of
accumulated amortization of $20.8 million at February 28, 1998 and $17.9 million
at May 31, 1997. Goodwill resulting from the acquisitions of Chaparral Steel
Company and Riverside Cement Company, totalling $148.8 million at February 28,
1998 and $57.2 million at May 31, 1997 (net of accumulated amortization) are
being amortized currently on a straight-line basis over 40-year periods. Other
intangibles consisting primarily of goodwill and non-compete agreements are
being amortized on a straight-line basis over periods of 2 to 15 years.
Management reviews remaining goodwill and other intangibles with consideration
toward recovery through future operating results (undiscounted) at the current
rates of amortization.

WORKING CAPITAL

Working capital totaled $221.5 million at February 28, 1998, compared to
$243.0 million at May 31, 1997.

Notes and accounts receivable of $152.1 million at February, compared with
$122.8 million at May, are presented net of allowances for doubtful receivables
of $7.2 million at February and $2.5 million at May.

Inventories are summarized as follows:

<TABLE>
<CAPTION>
FEBRUARY MAY
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished products........................................... $ 61,739 $ 77,021
Work in process............................................. 35,739 27,162
Raw materials and supplies.................................. 69,093 62,963
-------- --------
$166,571 $167,146
======== ========
</TABLE>

F-18
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

LONG-TERM DEBT

Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
FEBRUARY MAY
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bank obligations, maturing through 2002, interest rate 6.03%
(.4% over LIBOR).......................................... $ 38,000 $ 40,000
Senior notes due through 2017, interest rates average
7.28%..................................................... 200,000 --
Senior notes due through 2008, interest rates average
7.28%..................................................... 75,000 75,000
Senior notes due through 2004, interest rates average
10.2%..................................................... 56,000 --
Senior notes due through 1999, interest rate 14.2%.......... 4,091 --
Pollution control bonds, due through 2007, interest rate
6.38% (75% of prime)...................................... 7,595 7,935
Replaced Chaparral debt..................................... -- 64,182
Other, maturing through 2005, interest rates from 8% to
10%....................................................... 2,148 2,391
-------- --------
382,834 189,508
Less current maturities..................................... 13,430 13,452
-------- --------
$369,404 $176,056
======== ========
</TABLE>

Annual maturities of long-term debt for each of the five succeeding years
are $13.4, $9.1, $8.9, $8.9 and $46.7 million.

The Company has available a bank-financed $350 million long-term revolving
credit facility. In addition to the $38.0 million currently outstanding under
this facility, $9.4 million has been utilized to support letters of credit.
Commitment fees at a current annual rate of .125% are paid on the unused portion
of this facility.

On December 31, 1997, Chaparral's senior and first mortgage notes, which
restricted dividends and advances to its shareholders including the parent
company were replaced with senior notes of the Company having the same interest
rate and maturities as the Chaparral notes but with the same loan covenants as
the Company's other senior notes.

Loan agreements contain covenants which provide for minimum working
capital, restrictions on purchases of treasury stock and payment of dividends on
common stock, and limitations on incurring certain indebtedness and making
certain investments. Under the most restrictive of these agreements, the
aggregate amount of annual cash dividends on common stock is limited based on
the ratio of earnings before interest, taxes, depreciation and amortization to
fixed charges. The Company is in compliance with all loan covenant restrictions.

The amount of interest paid for the nine-month periods presented was $12.3
million in 1998 and $12.2 million in 1997. Interest capitalized totaled $2.1
million in the 1998 period.

SHAREHOLDERS' EQUITY

Common stock consists of:

<TABLE>
<CAPTION>
FEBRUARY MAY
-------- ------
(IN THOUSANDS)
<S> <C> <C>
Shares authorized........................................... 40,000 40,000
Shares outstanding at end of period......................... 21,088 20,896
Weighted average shares outstanding assuming dilution....... 21,717 22,163
Shares held in treasury..................................... 3,979 4,171
Shares reserved for stock options and other................. 3,979 2,163
</TABLE>

F-19
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

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. On March 29, 1996, the Company redeemed and retired all outstanding
shares of such $5 Cumulative Preferred Stock. An additional 25,000 shares are
designated Series B Junior Participating Preferred Stock. The Series B Preferred
Stock is not redeemable and ranks, with respect to the payment of dividends and
the distribution of assets, junior to (i) all other series of the Preferred
Stock unless the terms of any other series shall provide otherwise and (ii) the
$5 Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996,
the Company distributed a dividend of one preferred share purchase right for
each outstanding share of the Company's Common Stock. Each right entitles the
holder to purchase from the Company one two-thousandth of a share of the Series
B Junior Participating Preferred Stock at a price of $122.50 per one
two-thousandth share of Series B Preferred Stock, subject to adjustment. The
rights will expire on November 1, 2006 unless the date is extended or the rights
are earlier redeemed or exchanged by the Company pursuant to the Rights
Agreement.

STOCK OPTION PLANS

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES UNDER OPTION OPTION PRICE
------------------- ----------------
<S> <C> <C>
Outstanding at June 1........................... 1,797,131 $21.62
Granted....................................... 365,550 46.27
Exercised..................................... (195,454) 15.15
Canceled...................................... (44,040) 21.35
--------------- -----------
Outstanding at February 28...................... 1,923,187 $26.97
=============== ===========
</TABLE>

At February 28, 1998, there were 536,437 shares exercisable and 1,918,530
shares available for future grants. Outstanding options expire on various dates
to January 14, 2008.

INCOME TAXES

Federal income taxes for the interim periods ended February 28, 1998 and
1997, have been included in the accompanying financial statements on the basis
of an estimated annual rate. The estimated annualized tax rate is 33.1% for 1998
compared with 33.9% for 1997. The primary reason that these respective tax rates
differ from the 35% statutory corporate rate is due to goodwill expense which is
not tax deductible, percentage depletion which is tax deductible and the net
state income tax expense. The Company made income tax payments of $37.2 million
and $30.8 million in the nine-month periods ended February 28, 1998 and 1997,
respectively.

LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES

F-20
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

ACQUISITIONS

On December 31, 1997, the Company acquired the 15.7% separate public
ownership of Chaparral Steel Company. Pursuant to the merger agreement, the
owners of the approximately 4.5 million publicly traded shares received cash
consideration of $15.50 per share. As of February 28, 1998, $72.0 million of the
estimated $77.1 million total acquisition cost including transaction expenses
had been paid. The excess of the acquisition costs over the fair value of the
net assets acquired, approximately $34.9 million, was recorded as goodwill and
is being amortized over a 40-year period.

Effective December 31, 1997, the Company acquired Riverside Cement Company
for an estimated $115.4 million in cash and the assumption of certain
liabilities. An initial cash payment of $110.9 million was made on January 15,
1998 with the balance payable within 60 days. The estimated purchase price was
allocated to the net assets acquired based on their estimated fair values. The
fair value of tangible assets acquired and liabilities assumed was $65.8 million
and $9.1 million, respectively. The balance of the purchase price, $58.7
million, was recorded as goodwill and is being amortized over a 40-year period.
Riverside Cement Company owns and operates cement plants in Crestmore and Oro
Grande, California with distribution terminals in the northern and southern
parts of the state. The purchased manufacturing facilities are planned to be
upgraded and expanded with modern technology within existing permit limitations
and limestone reserves. The purchase is expected to increase the Company's
cement capacity by 60%.

F-21
<PAGE> 51

No dealer, salesperson or other individual has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the Offering. If given or made, such information or
representation must not be relied upon as having been authorized by the Company
or any of the Underwriters. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the Common Stock in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this Prospectus or in the affairs
of the Company since the date hereof.

TABLE OF CONTENTS
- ------------------------------------------------------

<TABLE>
<S> <C>
Prospectus Summary.................... 3

Risk Factors.......................... 7

Use of Proceeds....................... 10

Price Range of Common Stock and
Dividends........................... 10

Capitalization........................ 11

Selected Consolidated Financial
Data................................ 12

Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13

Business.............................. 19

Underwriting.......................... 25

Legal Matters......................... 26

Experts............................... 26

Additional Information................ 26

Incorporation of Certain Documents by
Reference........................... 27

Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

PROSPECTUS May , 1998

[TXI LOGO]

2,900,000 Shares

TEXAS INDUSTRIES, INC.

Common Stock

SBC WARBURG DILLON READ INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
<PAGE> 52

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on April 24, 1998.

TEXAS INDUSTRIES, INC.

By: /s/ ROBERT D. ROGERS*
----------------------------------
Robert D. Rogers
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ GERALD R. HEFFERNAN* Chairman of the Board April 24, 1998
- -----------------------------------------------------
Gerald R. Heffernan

/s/ ROBERT D. ROGERS* President and Chief Executive April 24, 1998
- ----------------------------------------------------- Officer
Robert D. Rogers

/s/ RICHARD M. FOWLER* Vice President and Chief Financial April 24, 1998
- ----------------------------------------------------- Officer
Richard M. Fowler

/s/ GORDON E. FORWARD* President of Chaparral Steel April 24, 1998
- ----------------------------------------------------- Company and Director
Gordon E. Forward

/s/ ROBERT ALPERT* Director April 24, 1998
- -----------------------------------------------------
Robert Alpert

/s/ JOHN M. BELK* Director April 24, 1998
- -----------------------------------------------------
John M. Belk

/s/ RICHARD I. GALLAND* Director April 24, 1998
- -----------------------------------------------------
Richard I. Galland

/s/ JAMES M. HOAK* Director April 24, 1998
- -----------------------------------------------------
James M. Hoak

Director April , 1998
- -----------------------------------------------------
Eugenio Clariond Reyes

/s/ IAN WACHTMEISTER* Director April 24, 1998
- -----------------------------------------------------
Ian Wachtmeister

/s/ ELIZABETH C. WILLIAMS* Director April 24, 1998
- -----------------------------------------------------
Elizabeth C. Williams

*By: /s/ RICHARD M. FOWLER April 24, 1998
------------------------------------------------
Richard M. Fowler
Attorney-in-Fact
</TABLE>