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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

OR

For the transition period from                      to                     

Commission File Number 1-4887

TEXAS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [    ]

The aggregate market value of the Registrant’s Common Stock, $1.00 par value, held by non-affiliates of the Registrant as of November 28, 2003, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $591,271,000 (based on the closing sale price of the Registrant’s Common Stock on that date as reported on the New York Stock Exchange).

As of August 2, 2004, 21,329,441 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the Registrant’s definitive proxy statement for the annual meeting of shareholders to be held October 19, 2004, are incorporated by reference into Part III.

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TABLE OF CONTENTS

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PART I

(a) General Development of Business

Texas Industries, Inc. and subsidiaries (unless the context indicates otherwise, collectively, the “Registrant”, the “Company” or “TXI”), is a leading supplier of construction materials through two business segments: cement, aggregate and concrete products (the “CAC” segment); and structural steel and steel bar products (the “Steel” segment). Through the CAC segment, TXI produces and sells cement, stone, sand and gravel, ready-mix concrete, and other products. Through the Steel segment, TXI produces and sells structural steel and special bar quality and other products. Demand for structural steel, cement, aggregate and concrete products is driven primarily by construction activity, while special bar quality products supply original equipment manufacturers and oil related markets.

TXI believes it is the largest producer of cement in Texas, a major cement producer in California and the second largest supplier of structural steel products in North America. TXI is the only North American producer of both cement and steel.

Incorporated April 19, 1951, TXI 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. On December 31, 1997, TXI acquired Riverside Cement Company, the owner of a 1.3 million ton per year portland cement plant and a 100,000 ton per year white cement plant. The acquisition increased TXI’s capacity at the time by 60% and opened the California regional cement market to the Company. During the May 2001 quarter TXI completed the expansion of its Midlothian, Texas cement plant. This expansion added approximately 1.5 million tons of capacity, which increased the Company’s total capacity by over 40% to 4.9 million tons. TXI’s structural steel facility in Virginia began operations during the August 1999 quarter expanding TXI’s steel capacity by over 60% to 3.0 million tons.

(b) Financial Information about Industry Segments

Financial information for the Registrant’s two industry segments, is presented in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 12 and 13, incorporated herein by reference.

(c) Narrative Description of Business

CEMENT, AGGREGATE AND CONCRETE

The CAC business segment includes the manufacture and sale of cement, aggregates, ready-mix concrete and other related products. Production and distribution facilities are concentrated primarily in Texas, Louisiana and California, with markets extending into contiguous states. The Company does not place heavy reliance on patents, franchises, licenses or concessions related to its CAC operations.

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Cement

TXI’s cement operations produce gray portland cement as its principal product. Also produced are specialty cements such as white portland, masonry and oil well.

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. Except for the Crestmore facility, the limestone reserves used as the primary raw material are located on fee-owned property adjacent to each of the plants. Raw material for the Crestmore facility is purchased from multiple outside suppliers. Information regarding each of the Company’s facilities is as follows:

The Company uses its patented CemStar^SM process in both of its Texas facilities and its Oro Grande, California facility to increase combined annual production by approximately 6%. The CemStar^SM process adds “slag,” a co-product of steel-making, into a cement kiln along with the regular raw material feed. The added slag serves to increase the production of clinker with little additional cost. The primary fuel source for all of the Company’s facilities is coal; however, the Company displaces approximately 15% of its coal needs at its Midlothian plant and approximately 8% of its coal needs at its Hunter plant by utilizing alternative fuels such as waste-derived fuels and tires. The Company’s facilities also consume large amounts of electricity obtained primarily under variable-price firm supply contracts of short duration. The Company believes that adequate supplies of both fuel and electricity are readily available.

The Company produced approximately 5.1 million tons of finished cement in 2004, 4.8 million tons in 2003 and 4.7 million tons in 2002. Total annual shipments of finished cement were approximately 5.3 million tons in 2004, 4.9 million tons in 2003 and 4.9 million tons in 2002, of which 4.4 million tons in 2004, 4.0 million tons in 2003 and 3.9 million tons in 2002 were shipped to outside trade customers.

The Company markets its cement products in the southwestern United States. The 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, no one of which accounted for more than ten percent of the trade sales volume in 2004.

Cement is distributed by rail or truck to eight distribution terminals located throughout the marketing area.

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

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Aggregates

TXI’s aggregate operations, which produce sand, gravel, and crushed limestone, are conducted from facilities primarily serving the Dallas/Fort Worth, Austin and Houston areas in Texas; the southern Oklahoma area; and the Alexandria, New Orleans, Baton Rouge and Monroe areas in Louisiana. The following table summarizes certain information about the Company’s aggregate production facilities.

Reserves identified with the facilities shown above and additional reserves available to support future plant sites are contained on approximately 39,000 acres of land, of which approximately 25,000 acres are owned in fee and the remainder leased. The plants operated at 82 percent of rated annual productive capacity for 2004 and sales for the year totaled 22.9 million tons, of which approximately 17.7 million tons were shipped to outside trade customers. In addition, the Company owns and operates three industrial sand plants and an aggregate blending facility.

The cost of transportation limits the marketing of aggregate products to the areas within approximately one hundred miles of the plant sites, therefore, sales are related to the level of construction activity near the plants. The products are marketed by the Company’s sales organization located in the areas served by the plants and are sold to numerous customers, no one of which would be considered significant to the Company’s business. Products are distributed to trade customers principally by contract or customer-owned haulers or through Company-owned rail distribution facilities.

Ready-mix Concrete

TXI’s ready-mix concrete operations are situated in three areas in Texas (Dallas/Fort Worth/Denton, Houston and East Texas), in north and central Louisiana, and at one location in southern Arkansas. The following table summarizes various information concerning these facilities.

The plants listed above are located on sites owned or leased by the Company. TXI 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. Ready-mix concrete is sold to various contractors in the construction industry, no one of which would be considered significant to the Company’s business. The Company believes that it is a significant participant in each of the Texas and Louisiana concrete products markets. The principal methods of competition in concrete products markets are quality and service at competitive prices.

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Other Products

Expanded shale and clay, a specialty aggregate product, is manufactured from facilities serving the Dallas/Fort Worth, Austin and Houston areas in Texas; the Oakland/San Francisco and Los Angeles areas in California; and the Denver area in Colorado. The following table summarizes certain information about the Company’s expanded shale and clay production facilities.

The expanded shale and clay plants operated at 80 percent of rated annual productive capacity for 2004 and sales for the year totaled approximately 1.6 million cubic yards, of which approximately 1.4 million cubic yards were shipped to outside trade customers.

The cost of transportation limits the marketing of expanded shale and clay products to the areas within approximately one hundred miles of the plant sites, therefore, sales are related to the level of construction activity near the plants. The products are marketed by the Company’s sales organization located in the areas served by the plants and are sold to numerous customers, no one of which would be considered significant to the Company’s business. Products are distributed to trade customers principally by contract or customer-owned haulers, and to a lesser extent by rail.

The Company manufactures and markets prepackaged concrete and related products from plant or distribution sites owned by the Company in the Dallas/Fort Worth, Austin and Houston areas in Texas and Bossier City, Louisiana.

The products are marketed by the Company’s sales force in each of these locations, and are delivered primarily by contract haulers. Because the cost of delivery is significant to the overall cost of most of these products, the market area is generally restricted to within approximately one hundred miles of the plant locations. These products are sold to various contractors, owners and distributors, no one of which would be considered significant to the Company’s business.

During 2004, the Company sold its clay brick and concrete block production facilities in Texas and Louisiana.

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STEEL

TXI’s steel facilities, located in Midlothian, Texas and Dinwiddie County, Virginia, produce a broad array of steel products. TXI uses its patented near net shape casting technology at both facilities. The process involves casting molten steel into a shape that is closer to a product’s final shape than traditional casting methods. This technology provides energy and capital cost savings in the making of wide flange beams and other structural steel products. The Texas facility has two electric arc furnaces with continuous casters that feed melted steel to a bar mill, a structural mill and a large beam mill. Finished (rolled) products produced include beams up to twenty-four inches wide, special bar quality products, merchant bar quality rounds, reinforcing bar and channels. The Virginia facility has one electric arc furnace and in-line processing units consisting of two near net shape casters and a sophisticated rolling mill. Finished products produced include beams up to thirty-six inches wide, sheet piling and H-piling.

The rated annual capacities of the operating facilities are as follows:

The bar and structural mills produced approximately 2.1 million tons of finished products in 2004, 1.8 million tons in 2003 and 1.9 million tons in 2002.

The principal raw material is recycled steel scrap. Shredded steel represents approximately 40% of the raw material mix. A major portion of the shredded steel requirements of the Texas facility is produced by an on-site shredder operation utilizing primarily crushed auto bodies purchased on the open market. The Company purchases shredded steel on the open market to meet the requirements of the Virginia facility. Another grade of recycled steel scrap, #1 Heavy, representing approximately 30% of the raw material mix is also purchased on the open market. The purchase price of recycled steel scrap is subject to market forces largely beyond the Company’s control. The supply of recycled steel scrap is expected to be adequate to meet future requirements.

Steel mills with electric arc furnaces consume large amounts of electricity and natural gas. Electricity for the Texas facility is obtained under variable-price supply contracts typically of short duration. Electricity for the Virginia facility is obtained from a local utility under an interruptible supply contract with price adjustments that reflect increases or decreases in the utility’s fuel costs. Natural gas is obtained under supply contracts. The Company believes that adequate supplies of both electricity and natural gas are readily available.

The Company’s steel products are marketed by the Company’s sales organization throughout North America. Sales are primarily to steel service centers and steel fabricators for use in the construction industry, as well as to cold finishers, forgers and original equipment manufacturers for use in the railroad, defense, automotive, mobile home and energy industries. The Company does not place heavy reliance on franchises, licenses or concessions. None of TXI’s customers accounted for more than ten percent of the Steel segment’s sales in 2004. Sales to affiliates are minimal. Orders are generally filled within 45 days and are cancelable. Delivery of finished products is accomplished by common-carrier, contract or customer-owned haulers, rail or barge.

The Company competes with steel producers, including foreign producers, on the basis of price, quality and service. Certain of the foreign and domestic competitors, including both large integrated steel producers and mini-mills, have substantially greater assets and larger sales organizations than TXI. Intense sales competition exists for substantially all of TXI’s steel products.

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RISKS RELATING TO THE COMPANY

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 domestic suppliers of these products as well as with importers of foreign cement. 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 and Weather

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, availability of public funds, 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. Extended periods of inclement weather can adversely impact construction activity at other times of the year as well. Steel results are also affected by the Company’s shut-downs scheduled every twelve to twenty-four months to refurbish its steel production facilities.

Growth Strategy

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 and Energy

The Company is dependent upon purchased recycled scrap steel as a raw material and upon the availability of 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

CAC Segment. A group of domestic cement producers, including the Company, filed antidumping petitions that have resulted in the imposition of significant antidumping duty cash deposits on gray 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 gray portland cement and clinker from Venezuela. On an annual basis, the antidumping 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. A substantial reduction or elimination of the existing antidumping duties could lower the Company’s results of operations.

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In 1995, the Antidumping Code of 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 (“ITC”) to conduct “sunset” reviews of all outstanding antidumping and countervailing duty orders and suspension agreements, including the antidumping orders against gray portland cement and clinker from Mexico and Japan and the suspension agreements on gray portland cement and clinker from Venezuela, to determine whether they should be terminated or remain in effect. In 2000, the Department of Commerce and the ITC conducted “sunset” reviews of the antidumping orders and suspension agreements and determined that they should remain in effect until 2005 when the ITC is scheduled to conduct another sunset review. However, the ITC determined that the suspension agreements with Venezuela were no longer necessary. Mexican cement producers have appealed the ITC sunset determination regarding imports from Mexico to a dispute panel established under the North American Free Trade Agreement. The Government of Mexico has also requested consultations with the United States regarding the Mexican cement antidumping order under World Trade Organization (“WTO”) dispute settlement rules. The consultations could lead to Mexico filing a WTO complaint challenging the Department of Commerce’s and the ITC’s determinations in sunset reviews and the annual determination of the amount of duties. In addition, the Government of Mexico has filed a request with the WTO to form a dispute resolution panel regarding the United States antidumping order on Mexican cement. The exact schedule of the WTO preceding is not yet established. Domestic cement producers have appealed the ITC sunset review determinations regarding imports from Venezuela to the U.S. Court of International Trade. Although to date Venezuelan imports have not competed in the Company’s markets to any significant degree, they may do so in the future.

Independently owned cement operations could undertake to construct new import facilities and begin to purchase large quantities of low-priced cement from countries not yet subject to antidumping orders, such as those in Asia, which could not compete with domestic producers. An influx of low-priced cement or clinker products from countries not subject to antidumping orders could lower the Company’s results of operations.

Steel Segment. Excessive imports of steel into the United States have, and may again in the future, exert downward pressure on U.S. steel prices and significantly reduce the Company’s sales, margins and profitability. Some foreign steel producers are owned, controlled or subsidized by foreign governments. As a result, decisions by these producers with respect to their production, sales and pricing are often influenced to a greater degree by political and economic policy considerations than by prevailing market conditions, realities of the marketplace or consideration of profit or loss.

In July 1999, complaints were filed with the ITC and the U.S. Department of Commerce by the Company, Northwestern Steel & Wire Co., Nucor-Yamato Steel Co. and the United Steelworkers of America seeking to impose antidumping and countervailing duties against imports of structural steel beams from Germany, Japan, South Korea and Spain. In June and July 2000, the ITC made respective determinations that an industry in the United States is materially injured or threatened with material injury by reason of such imports from Japan and Korea that the Department of Commerce has determined are subsidized and sold in the United States at less than fair value. As a result of the ITC’s affirmative determinations, the Department of Commerce directed the U.S. Customs Service to impose countervailing and antidumping duties on imports of certain structural steel beams from these two countries. However, imports of structural steel beams from other countries increased significantly and the Committee for Fair Beam Imports (composed of Northwestern Steel & Wire Co., Nucor Corp., Nucor-Yamato Steel Co. and the Company) again petitioned the ITC and the U. S. Department of Commerce concerning imports of certain structural steel beams from China, Germany, Luxembourg, Russia, South Africa, Spain and Taiwan. On June 17, 2002, the ITC determined that, although the Department of Commerce had determined that these imports were being sold in the United States at less than fair value, such imports did not materially injure or threaten with material injury an industry in the United States, and no antidumping duties were imposed on imports of structural steel beams from these countries.

Existing duties are subject to annual review upon request. A substantial reduction or elimination of the existing antidumping duties, or an influx of low-priced steel products from countries not subject to antidumping orders, could again create downward pressure on U.S. steel prices and, in turn, lower the Company’s results of operations.

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Impact of Environmental Laws

The Company’s operations and those of its subsidiaries are subject to various federal, state and local environmental, health and safety laws and regulations. These laws and regulations govern the generation, use, handling, storage, transportation and disposal of hazardous substances and wastes, and provide for the investigation and remediation of contamination existing at current and former properties, and at third-party waste disposal sites. They have tended to become increasingly stringent over time. As with others in its business, the Company expends substantial amounts to comply with these laws and regulations, including amounts for pollution control equipment required to monitor and regulate wastewater discharges and air emissions. The U.S. Environmental Protection Agency (“EPA”) and state agencies are charged with enforcing these laws and regulations, and these agencies can impose substantial fines and penalties, as well as curtail and/or suspend the Company’s operations, for violations and non-compliance. Moreover, certain of these laws and regulations permit private parties to bring actions against the Company for injuries to persons and damages to property allegedly caused by its operations. Changes in environmental laws may interrupt production, increase the cost of compliance and hinder the Company’s ability to build new or expand production facilities.

Emissions sources at the Company’s facilities are regulated by a combination of permit limitations and emission standards of national and statewide application. The Company believes it is in substantial compliance with its permit limitations and emission standards and regulations applicable to its existing facilities. Future changes in permit limitations and emission standards, however, may result in prolonged production interruption, significant costs of compliance or a hindrance of 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. 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”), electric arc furnace dust (“EAF dust”) generated by the Company’s steel facilities and the ignitability of the waste derived fuels that the Company uses as a primary or supplementary fuel substitute for nonrenewable coal and natural gas to fire certain of its cement kilns.

Currently, CKD is exempt from hazardous waste management standards under the Resource Conservation and Recovery Act (“RCRA”) if certain tests are satisfied. The Company 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 that it believes will comply with these anticipated standards, but such practices and programs may not continue to comply in the future if regulations become more restrictive.

The Company utilizes hazardous materials such as gasoline, acids, solvents and chemicals as well as materials that have been designated or characterized as hazardous waste by the EPA, which it utilizes for energy recovery. This requires the Company to 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 it 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.

The Company’s steel facilities generate, in the same manner as other similar 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 and health and safety matters, but since many of these requirements are subjective and therefore not quantifiable, are 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 the Company’s intentions to comply with all legal requirements, if injury to persons or damage to property or contamination of the environment has been or is caused by the conduct of its business or hazardous substances or wastes used in, generated or disposed of by it, the Company may be liable for such injuries and damages, and be required to pay the cost of investigation and remediation of such contamination. The amount of such liability could be material and the Company may incur material liability in connection with possible claims related to its operations and properties under environmental, health and safety laws.

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Equipment Failure

Due to the high fixed cost nature of the Company’s business, interruptions in its production capabilities may cause the Company’s productivity and results of operations to decline significantly during the affected period. The Company’s manufacturing processes are dependent upon critical pieces of equipment, such as its cement kilns, grinding mills, stone crushers, steel furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers. This equipment may, on occasion, be out of service as a result of unanticipated failures or damaged during accidents, which may lead to production curtailments and shutdowns. In addition to equipment failures, its facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions.

Earthquakes

The Company’s operations in California are susceptible to damage from earthquakes. Any significant earthquake damage could materially adversely affect the Company’s results of operations. The Company maintains only a limited amount of earthquake insurance and, therefore, is not fully insured against earthquake risk.

OTHER ITEMS

Employees

TXI has approximately 4,100 employees: 2,500 employed in CAC operations, 1,400 employed in Steel operations and the balance employed in corporate resources.

Intellectual Property

While the Company maintains trademarks such as TXI ^® and Maximizer ^® and process patents such as CemStar ^SM and near net shape casting, the Company does not believe any of its active trademarks or patents are essential to the Company’s business as a whole.

Real Estate

The Company is involved in the development of its surplus real estate and real estate acquired for development of high quality industrial and multi-use parks in the metropolitan areas of Dallas/Fort Worth and Houston, Texas.

Available Information

TXI files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements and other information filed by TXI at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call (800) SEC-0330 for further information on the Public Reference Room. The SEC maintains an internet web site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. TXI’s filings are also available to the public at the website maintained by the SEC, http://www.sec.gov.

TXI makes available, free of charge, through its investor relations website its reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as soon as reasonably practicable after they are filed with the SEC. The URL for TXI’s investor relations website is www.txi.com.

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The information required by this item is included in Item 1.

The information required by this item is included in the section of the Notes to Consolidated Financial Statements entitled “Legal Proceedings and Contingent Liabilities” presented in Part II, Item 8 on page 37 and incorporated herein by reference.

None

The following table presents certain information about the executive officers of the Registrant.

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PART II

The shares of common stock, $1 par value, of the Registrant are traded on the New York Stock Exchange (ticker symbol TXI). As of August 2, 2004 , there were 2,535 holders of record of the Company’s common stock. Common stock market prices, dividends and certain other items are presented in the Notes to Consolidated Financial Statements entitled “Quarterly Financial Information” on page 46, incorporated herein by reference. The restriction on the payment of dividends described in the Notes to Consolidated Financial Statements entitled “Long-term Debt” on pages 32 and 33 is incorporated herein by reference. The Company’s quarterly cash dividend at $.075 per common share has remained unchanged since January 1997.

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

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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 steel bar products (the “Steel” segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, ready-mix concrete, expanded shale and clay aggregate, and other products. Through the Steel segment, the Company produces and sells structural steel, piling products, special bar quality products, merchant bar quality rounds, reinforcing bar and channels.

The Company’s CAC facilities are concentrated primarily in Texas, Louisiana and California, with several products marketed throughout the United States. The Company owns long-term reserves of limestone, the primary raw material for the production of cement.

The Company’s steel facilities produce a broad array of steel products, utilizing recycled steel scrap obtained from crushed automobiles and other sources as the principal raw material. Steel products, sold principally to steel service centers, fabricators, cold finishers, forgers and original equipment manufacturers, are distributed primarily to markets in North America.

Both the CAC and Steel businesses require large amounts of capital investment, energy, labor and maintenance.

Corporate Resources include administration, financial, legal, environmental, human resources and real estate activities which are not allocated to operations and are excluded from operating profit. Assets identified with Corporate Resources include cash and cash equivalents, real estate and investments, debt issuance costs and deferred tax assets.

BUSINESS SEGMENTS

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RESULTS OF OPERATIONS

Operating Profit – Fiscal 2004 Compared to Fiscal 2003

CAC Operations

CAC operating profit at $122.8 million increased $42.1 million from 2003. The sale of the Company’s brick production facilities in Texas and Louisiana contributed $34.7 million to other income. Higher shipments for all major CAC products also contributed to the increased operating profit. The Company has experienced improving overall demand for its CAC products throughout the year.

Net Sales. CAC net sales at $767.2 million increased 7%. Total cement sales increased $25.2 million on 8% higher shipments. Ready-mix sales increased $3.0 million on somewhat higher volume. Aggregate sales increased $15.5 million on 17% higher shipments. Average trade prices for the major CAC products were comparable to the prior year.

Operating Costs. CAC cost of products sold at $637.3 million, including depreciation, depletion and amortization, increased $40.6 million on higher shipments and aggregate production. Cement unit costs were comparable to the prior year.

Selling, general and administrative expense at $46.2 million, including depreciation and amortization, increased $4.2 million primarily due to higher incentive compensation and general expenses.

Other income includes $34.7 million from the sale of the Company’s brick production facilities in Texas and Louisiana.

Steel Operations

Steel operating profit at $44.1 million increased $92.8 million from 2003. Higher selling prices and shipments, and improved production rates and efficiencies at the Virginia facility, contributed to the improvement. During the year rapidly escalating raw material costs affected results. Beginning in January 2004 margins began to recover due to increased selling prices and the implementation of a raw material surcharge.

Net Sales. Steel sales at $905.3 million increased 40%. Structural steel sales increased $182.8 million on 12% higher shipments and 25% higher average realized prices. Bar mill sales increased $61.7 million on 25% higher shipments and 23% higher realized prices.

Operating Costs. Steel cost of products sold at $842.3 million, including depreciation and amortization, increased $169.0 million. The increased costs were the result of higher shipments and the effect of higher raw material costs on unit costs partially offset by improved operating efficiencies at the Virginia facility due to increased production levels.

The Company has experienced unprecedented increases in the cost of steel scrap, the principal raw material used in its steel production. As a result of these increases in scrap costs the Company incurred a charge to value inventories using the last-in, first-out (“LIFO”) method of accounting of $26.9 million in 2004 compared to $8.5 million in the prior year.

Selling, general and administrative expense at $26.5 million increased $5.5 million primarily due to higher incentive compensation and bad debt expense.

Other income includes $4.2 million obtained from the Company’s litigation against certain graphite electrode suppliers.

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Operating Profit—Fiscal 2003 Compared to Fiscal 2002

CAC Operations

CAC operating profit at $80.7 million declined $38.5 million from 2002. Softening demand due to the decline in non-residential construction and abnormal inclement weather in Texas during the winter months reduced ready-mix and aggregate shipments. Higher energy and maintenance costs reduced cement margins.

Net Sales. CAC net sales at $718.1 million decreased 6%. Total cement sales decreased $11.7 million on comparable shipments as average trade prices declined 2%. Ready-mix sales declined $28.2 million on 10% lower volume at 2% lower average prices. Aggregate sales decreased $12.2 million on 10% lower shipments.

Operating Costs. CAC cost of products sold at $596.7 million, including depreciation, depletion and amortization, was unchanged from the prior year as lower ready-mix volume offset the impact of higher energy and maintenance costs on cement unit costs.

Selling, general and administrative expense at $41.9 million, including depreciation and amortization, decreased $6.8 million primarily due to lower incentive compensation and bad debt expense.

Other income decreased due to lower gains from the disposal of surplus operating assets.

Steel Operations

Steel operating profit at $48.6 million loss declined $80.0 million from 2002. The lower operating profit included a $9.1 million decrease in other income from the Company’s litigation against certain graphite electrode suppliers. The decline in non-residential construction resulted in a very competitive structural steel market. Realized prices for structural steel declined significantly from the prior year as the Company sought to maintain market share. Increased raw material and energy costs also contributed to reduce margins.

Net Sales. Steel sales at $646.0 million were $39.2 million below the prior year. Structural steel average realized prices for the year were down 6% on 2% lower shipments. Bar sales were comparable to the prior year as 6% lower shipments were offset by 8% higher realized prices.

Operating Costs. Steel cost of products sold at $673.4 million, including depreciation and amortization, increased $33.2 million. Lower shipments that reduced costs $10.8 million were offset by higher unit production costs resulting from increased raw material and energy costs.

Selling, general and administrative expense at $20.9 million decreased $6.7 million primarily due to lower bad debt and general expenses.

Other income included $500,000 from the Company’s litigation against certain graphite electrode suppliers compared to $9.6 million in 2002.

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Corporate Resources

Selling, general and administrative expense at $30.7 million in 2004, including depreciation and amortization, increased $600,000. Increased incentive compensation and retirement expenses of $6.0 million were offset by decreased bad debt and general expenses, and the effect of the termination of the Company’s agreement to sell receivables. Other income in 2004 decreased $2.2 million primarily due to lower real estate income.

Selling, general and administrative expense at $30.1 million in 2003, including depreciation and amortization, decreased $2.7 million on lower incentive compensation and costs associated with the Company’s agreement to sell receivables. Other income in 2003 decreased $4.9 million primarily due to lower real estate income.

Interest Expense

Interest expense at $73.7 million in 2004 increased $27.8 million. The increase was the result of the June 2003 refinancing which increased the Company’s outstanding debt $114.8 million and the effective interest rate on fixed rate debt 3%. The Company has entered into interest rate swaps on $300 million of the senior notes such that the interest payable effectively becomes variable based on six-month LIBOR, currently 7.26%.

Interest expense at $45.9 million in 2003 decreased $7.8 million from the prior year as a result of lower average outstanding debt in the period.

Loss on Early Retirement of Debt

As a result of the June 2003 refinancing, the Company recognized an ordinary loss on early retirement of debt of $11.2 million. The loss represents $8.5 million in premium or consent payments to holders of the existing senior notes and a write-off of $2.7 million of debt issuance costs associated with the debt repaid. Effective May 27, 2004, the Company lowered the available borrowings under the new senior secured credit facility from $200 million to $100 million. The Company recognized an ordinary loss on early retirement of debt of $1.1 million, representing a termination fee of $100,000 and a write-off of $1.0 million of debt issuance costs associated with the portion of the facility terminated.

Income Taxes

The Company’s effective tax rate was 27.4% in 2004, 40.1% in 2003 and 29.3% in 2002. The primary reason that the current tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense. Deferred taxes include a $13.0 million alternative minimum tax credit carryforward that is available for offset against future regular income taxes. In addition, the Company has $80.4 million in federal net operating loss carryforwards, which expire in 2023.

Cumulative Effect of Accounting Change—Net of Income Taxes

Effective June 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations,” which applies to legal obligations associated with the retirement of long-lived assets. The Company incurs legal obligations for asset retirement as part of its normal CAC and Steel operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Application of the new rules resulted in a cumulative charge of $1.1 million, net of income taxes of $600,000.

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CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The Company believes the following critical accounting policies affect its more complex judgments and estimates.

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

Environmental Liabilities. The Company is subject to environmental laws and regulations established by federal, state and local authorities, and makes provision for the estimated costs related to compliance when it is probable that a reasonably estimable liability has been incurred.

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

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

Goodwill. Management tests goodwill for impairment at least annually. If the carrying amount of the goodwill exceeds its fair value an impairment loss is recognized. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the applicable reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for the Company’s products, capital needs, economic trends and other factors.

LIQUIDITY AND CAPITAL RESOURCES

To improve liquidity and provide more financial and operating flexibility, the Company on June 6, 2003 issued $600 million of 10.25% senior notes maturing June 15, 2011. A portion of the net proceeds was used to repay $473.5 million of the outstanding debt at May 31, 2003. The remaining proceeds were used to repurchase the entire outstanding interest in the defined pool of trade receivables previously sold. To replace the terminated revolving credit facility and agreement to sell receivables, the Company entered into a new senior secured credit facility expiring June 6, 2007. The Company recognized a loss on early retirement of debt of $11.2 million, representing $8.5 million in premium or consent payments to holders of the existing senior notes and a write-off of $2.7 million of debt issuance costs associated with the debt repaid.

Senior Secured Credit Facility. Available borrowings under the senior secured credit facility were lowered from $200 million to $100 million effective May 27, 2004. The Company recognized a loss on early retirement of debt of $1.1 million, representing a termination fee of $100,000 and a write-off of $1.0 million of debt issuance costs related to the portion of the facility that was terminated. Borrowings under the facility are limited based on the net amounts of eligible accounts receivable. Borrowings bear annual interest at either the LIBOR rate plus 2.25% or the prime rate plus .25%. These interest rate margins are subject to performance price adjustments. Commitment fees at an annual rate of .375% are to be paid on the unused portion of the facility. The Company may terminate the facility at any time, and under certain circumstances may be required to pay a termination fee.

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The senior secured credit facility is collateralized by first priority liens on substantially all of the Company’s existing and future acquired accounts receivable, inventory, deposit accounts, and certain of its general intangibles. The agreement contains covenants restricting, among other things, prepayment or redemption of notes, distributions, dividends and repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. In addition, there is the requirement to meet certain financial tests and to maintain certain financial ratios if the excess availability under the senior secured credit facility falls below $30 million, including maintaining a fixed charge coverage ratio and meeting a minimum tangible net worth test.

No borrowings were outstanding under the senior secured credit facility at May 31, 2004; however, $29.8 million of the facility was utilized to support letters of credit and hedge obligations.

The Company’s ability to incur additional debt is currently limited to $70.2 million of available borrowings under the senior secured credit facility. The payment of cash dividends on common stock is currently limited to an annual amount of $7.0 million.

Senior Notes. The senior notes represent general unsecured senior obligations of the Company. The senior notes were issued by Texas Industries, Inc. (the parent company), which has no independent assets or operations, excluding amounts related to its investments in its subsidiaries and financing activities. All consolidated subsidiaries of the Company are 100% owned and, excluding minor subsidiaries without operations or material assets, have provided a joint and several, full and unconditional guarantee of the securities. The terms of the notes contain covenants that among other things provide for restrictions on the payment of dividends or repurchasing common stock, making certain investments, incurring additional debt or selling preferred stock, creating liens, and transferring assets. The Company is also required to reinvest through capital expenditures the net proceeds from asset sales within 360 days of their receipt. To the extent that the amount not reinvested exceeds $10 million, the Company must make an offer to all note holders to purchase the maximum principal amount of notes that may be purchased out of the remaining proceeds at an offer price equal to 100% of principal amount plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase. The Company has a requirement to reinvest through capital expenditures approximately $24.6 million prior to February 2005. These capital expenditures may be funded, if necessary, from borrowings under the Company’s long-term senior secured credit facility. At any time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 110.25% of the principal amount thereof, plus accrued interest, with the net cash proceeds from certain equity offerings. In addition, at any time on or prior to June 15, 2007, the Company may redeem all or part of the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium. After June 15, 2007, the Company may redeem all or a part of the notes at a redemption price of 105.125% in 2007, 102.563% in 2008 and 100% in 2009 and thereafter.

Interest Rate Swaps. The Company has outstanding interest rate swap agreements that have the economic effect of modifying the interest obligations associated with $100 million and $200 million of the senior notes, effective January 30, 2004 and April 6, 2004, respectively, such that the interest payable effectively becomes variable based on six-month LIBOR, set on June 15^th and December 15^th of each year. The interest rate swaps have been designated as fair value hedges and have no ineffective portion. The notional amounts and the termination dates match the principal amounts and maturities of the $300 million portion of the outstanding senior notes. As a result of the interest rate swaps, the current effective interest rate on the hedged portion of the senior notes was reduced to 7.26%.

On March 11, 2004, the Company terminated its August 5, 2003 interest rate swap agreements associated with $200 million of the senior notes resulting in a gain of $8.4 million. The gain was recorded as an increase in the carrying value of the Company’s long-term debt and is being amortized as an offset to interest expense over the remaining term of the senior notes.

The Company historically has financed major capital expansion projects with cash from operations and long-term borrowings. Working capital requirements and capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of its operations are funded with cash from operations. The fiscal year 2005 capital expenditure budget for these activities is estimated currently at approximately $75 million. In addition, the Company leases certain mobile and other equipment used in its operations under operating leases that in the normal course of business are renewed or replaced by subsequent leases.

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The Company’s estimated future payments under its material contractual obligations are summarized, as follows:

Future payments under leases exclude mineral rights which are insignificant and are generally required only for products produced. Outstanding letters of credit generally only collateralize payment of recorded liabilities.

As discussed in Notes to Consolidated Financial Statements entitled “Retirement Plans” on pages 37 through 39, the Company contributed $1.5 million to a defined benefit pension plan in 2004 and expects to make a contribution of $4.1 million in 2005. The Company paid benefits under a health benefit plan of $500,000 in 2004 and expects to pay a similar amount in 2005. The Company paid benefits under a series of non-qualified defined benefit plans of $2.3 million in 2004 and expects to pay a similar amount in 2005.

We expect cash from operations and available borrowings under the senior secured credit facility to be sufficient to provide funds for capital expenditure commitments, scheduled debt repayments and working capital needs for at least the next year.

Cash Flows

Net cash provided by operations was $16.9 million, compared to $56.9 million in the prior year. Operating cash flows excluding repurchases of trade receivables increased $66.0 million primarily as a result of increased net income and the related effect on deferred taxes. Changes in working capital items were primarily the result of higher Steel prices and shipments that increased net receivables $37.5 million and the Company’s June 2003 refinancing that increased accrued interest $23.6 million. In addition, the Company funded the repurchase of $115.5 million of trade receivables out of the proceeds of the June 2003 refinancing.

Net cash provided by investing activities was $13.3 million, compared to $42.1 million used in the prior year. Capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of the Company’s operations excluding major plant expansions were $29.8 million, down $25.0 million from the prior year. Proceeds from disposal of assets result from the routine sale of surplus operating assets, which in 2004 includes the proceeds from the sale of the Company’s brick production facilities in Texas and Louisiana and in 2003 includes the collection of notes receivable related to disposals in 2001.

Net cash provided by financing activities was $105.3 million, compared to $16.0 million used in the prior year. The proceeds from the June 2003 refinancing net of issuance and retirement costs funded the repurchase of trade receivables. The Company terminated its August 2003 interest rate swap agreements resulting in a gain of $8.4 million and entered into new interest rate swap agreements. The Company’s quarterly cash dividend of $.075 per common share remained unchanged from the prior year.

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OTHER ITEMS

Litigation

In November 1998, Chaparral Steel Company, a 100% owned subsidiary, filed an action in the District Court of Ellis County, Texas against certain graphite electrode suppliers seeking damages for illegal restraints of trade in the sale of graphite electrodes. The Company has now obtained settlements from all the major producers named in the action and does not anticipate any material future settlements.

Environmental Matters

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; however, from time to time the Company receives claims from federal and state environmental regulatory agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience and the information currently available to it, the Company believes that such claims will not have a material impact on its financial condition or results of operations. Despite the Company’s compliance and experience, it is possible that the Company could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the Company.

Market Risk

The Company has not historically entered into derivatives or other financial instruments for trading or speculative purposes. Because of the short duration of the Company’s investments, changes in market interest rates would not have a significant impact on their fair value.

As noted under Liquidity and Capital Resources, the Company on June 6, 2003, issued $600 million of 10.25% senior notes maturing June 15, 2011. The refinancing increased the amount of fixed rate debt outstanding, and added approximately 3% to its average effective interest rate. The fair value of the debt will vary as interest rates change. At May 31, 2004, the fair value of long-term debt, estimated based on broker/dealer quoted market prices, is approximately $630.6 million compared to the carrying amount of $599.1 million and the fair value of convertible subordinated debentures, estimated based on NYSE quoted market prices, is approximately $178.3 million compared to the carrying amount of $199.9 million.

The Company has outstanding interest rate swap agreements that change the characteristics of the interest payments on $300 million of the underlying fixed rate debt from fixed rate payments to short-term LIBOR-based variable rate payments in order to achieve a mix of interest rates on the Company’s long-term debt which, over time, is expected to moderate financing costs. The swap is sensitive to interest rate changes. For example, if short-term interest rates increase (decrease) by one percentage point from the date of the refinancing, annual pretax interest expense would increase (decrease) by $3 million.

Change in Principles of Consolidation

Effective February 29, 2004, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” Prior to its adoption the Company consolidated all majority owned subsidiaries. FIN 46 provides that a variable interest entity is to be consolidated by its primary beneficiary. The Company has a variable interest in a subsidiary trust that has mandatorily redeemable preferred securities outstanding with a liquidation value of $199.9 million. These securities were previously reported on the Company’s balance sheet as Company-obligated Mandatorily Redeemable Preferred Securities of Subsidiary Holding Solely Company Convertible Debentures. The trust is a variable interest entity under FIN 46 because the Company has a limited ability to make decisions about its activities. However, the Company is not the primary beneficiary of the trust, and therefore, the trust and the mandatorily redeemable preferred securities issued by the trust are no longer reported on the Company’s balance sheet. Instead, the convertible subordinated debentures held by the trust which previously were eliminated in the Company’s consolidated financial statements are reported on its balance sheet. Distributions on the mandatorily redeemable preferred securities are no longer reported on the Company’s statements of operations, but interest on the debentures is recorded as interest expense. These reclassifications are reflected for all periods presented and have no overall effect on the Company’s results of operations or financial position.

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

Private Securities Litigation Reform Act of 1995

Certain statements contained in this annual report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on the Company’s business, construction activity in the Company’s markets, abnormal periods of inclement weather, changes in the cost of raw materials, fuel and energy, and the impact of environmental laws and other regulations (see Part I, Item 1 under the caption “Risks Relating to the Company” on pages 6 through 9).

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The information required by this item is included in Item 7.

INDEX TO FINANCIAL STATEMENTS

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CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES