RESULTS OF OPERATIONS

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

Management uses segment operating profit as its principal measure to assess performance and to allocate resources. Business segment operating profit consists of net sales less operating costs and expenses that are directly attributable to the segment. Unallocated overhead and other income includes income and operating overhead expenses such as environmental, engineering and other administrative activities that directly relate to some or all of our segments and are not allocated. Corporate includes non-operating income and expenses related to administrative, financial, legal, human resources and real estate activities.

The following is a summary of operating results for our business segments and certain other operating information related to our principal products.

Cement Operations



                                            Three months ended           Six months ended
                                               November 30,                November 30,
  In thousands except per unit              2008          2007          2008          2007

  Operating Results
  Total cement sales                    $   98,407     $ 122,586     $ 209,811     $ 246,009
  Total other sales and delivery fees        9,641         8,723        19,600        16,435

  Total segment sales                      108,048       131,309       229,411       262,444
  Cost of products sold                     94,206        93,572       198,763       202,679

  Gross profit                              13,842        37,737        30,648        59,765
  Selling, general and administrative       (5,338 )      (3,941 )     (10,042 )      (8,952 )
  Other income                                 948           681         6,151         1,505

  Operating Profit                      $    9,452     $  34,477     $  26,757     $  52,318

  Cement
  Shipments (tons)                           1,083         1,319         2,301         2,609
  Prices ($/ton)                        $    90.87     $   92.88     $   91.17     $   94.27
  Cost of sales ($/ton)                 $    79.04     $   64.41     $   79.15     $   71.80

Three months ended November 30, 2008

Operating profit for the three-month period ended November 30, 2008 was $9.5 million, a decrease of $25.0 million from the prior year period.

Total cement sales for the three-month period ended November 30, 2008 decreased $24.2 million from the prior year period as construction activity declined in both our Texas and California market areas. Our Texas market area accounted for approximately 70% of total cement sales in the current period compared to 68% of total cement sales in the prior year period. In our Texas market area cement shipments decreased 19% from the prior year period and average prices increased 3%. In our California market area cement shipments decreased 14% from the prior year period and average prices decreased 14%.

Cost of products sold for the three-month period ended November 30, 2008 increased $0.6 million from the prior year period. The effect of lower shipments was offset by higher unit costs. Cement unit costs increased 23% from the prior year period. In addition to higher energy costs, scheduled maintenance at our north Texas cement plant of $8.0 million and higher depreciation at our Oro Grande, California cement plant of $3.3 million contributed to increased costs.

Selling, general and administrative expense for the three-month period ended November 30, 2008 increased $1.4 million from the prior year period primarily due to higher legal and other professional expenses.

Other income for the three-month period ended November 30, 2008 increased $0.3 million from the prior year period primarily due to higher oil and gas royalty income.

Six months ended November 30, 2008

Operating profit for the six-month period ended November 30, 2008 was $26.8 million, a decrease of $25.6 million from the prior year period.

Total cement sales for the six-month period ended November 30, 2008 decreased $36.2 million from the prior year period as construction activity declined in our California market area. Construction activity also declined in our Texas market area during the November 2008 quarter. Our Texas area accounted for approximately 70% of total cement sales in the current period compared to 65% of total cement sales in the prior year period. In our Texas market area cement shipments decreased 10% from the prior year period and average prices increased 2%. In our California market area cement shipments decreased 16% from the prior year period and average prices decreased 13%.

Cost of products sold for the six-month period ended November 30, 2008 decreased $3.9 million from the prior year period. The effect of lower shipments was offset in part by higher unit costs. Cement unit costs increased 10% from the prior year period. In addition to higher energy costs, scheduled maintenance at our cement plants of $4.0 million and higher depreciation at our Oro Grande, California cement plant of $6.6 million contributed to increased costs. The higher energy costs were partially offset by operating efficiencies that lowered the energy usage per ton of clinker produced.

Selling, general and administrative expense for the six-month period ended November 30, 2008 increased $1.1 million from the prior year period primarily due to higher legal and other professional expenses offset in part by lower incentive compensation expense.

Other income for the six-month period ended November 30, 2008 increased $4.6 million from the prior year period. Other income in the current period includes a lease bonus payment of $2.8 million received upon the execution of an oil and gas lease on property we own in north Texas. In addition, other income in the current period includes a gain of $1.7 million from the sale of emission credits associated with our California cement operations.

Aggregate Operations



                                            Three months ended           Six months ended
                                               November 30,                November 30,
  In thousands except per unit              2008           2007         2008          2007

  Operating Results
  Total stone, sand and gravel sales    $   35,667      $ 43,324     $  76,346     $  83,128
  Total other sales and delivery fees       24,838        30,559        55,956        60,980

  Total segment sales                       60,505        73,883       132,302       144,108
  Cost of products sold                     50,769        59,610       110,214       114,652

  Gross profit                               9,736        14,273        22,088        29,456
  Selling, general and administrative       (3,506 )      (3,640 )      (7,329 )      (7,787 )
  Other income                                 463           237           870           643

  Operating Profit                      $    6,693      $ 10,870     $  15,629     $  22,312

  Stone, sand and gravel
  Shipments (tons)                           4,605         5,863         9,806        11,414
  Prices ($/ton)                        $     7.74      $   7.39     $    7.79     $    7.28
  Cost of sales ($/ton)                 $     6.38      $   5.76     $    6.33     $    5.60

Three months ended November 30, 2008

Operating profit for the three-month period ended November 30, 2008 was $6.7 million, a decrease of $4.2 million from the prior year period as construction activity declined in our market areas.

Total segment sales for the three-month period ended November 30, 2008 decreased $13.4 million from the prior year period as total stone, sand and gravel sales were down $7.7 million. Total stone, sand and gravel shipments decreased 21% from the prior year period and average prices increased 5%.

Cost of products sold for the three-month period ended November 30, 2008 decreased $8.8 million from the prior year period primarily due to lower shipments. Stone, sand and gravel unit costs increased primarily due to the impact of production levels on unit costs.

Selling, general and administrative expense for the three-month period ended November 30, 2008 decreased $0.1 million from the prior year period primarily due to lower incentive compensation expense.

Other income for the three-month period ended November 30, 2008 increased $0.2 million from the prior year period primarily due to higher oil and gas income.

Six months ended November 30, 2008

Operating profit for the six-month period ended November 30, 2008 was $15.6 million, a decrease of $6.7 million from the prior year period as construction activity declined in our market areas during the November 2008 quarter.

Total segment sales for the six-month period ended November 30, 2008 decreased $11.8 million from the prior year period as total stone, sand and gravel sales were down $6.8 million. Total stone, sand and gravel shipments decreased 14% from the prior year period and average prices increased 7%.

Cost of products sold for the six-month period ended November 30, 2008 decreased $4.4 million from the prior year period primarily due to lower shipments. Stone, sand and gravel unit costs increased primarily due to the impact of production levels on unit costs.

Selling, general and administrative expense for the six-month period ended November 30, 2008 decreased $0.5 million from the prior year period primarily due to lower incentive compensation expense.

Other income for the six-month period ended November 30, 2008 increased $0.2 million from the prior year period primarily due to higher oil and gas income.

Consumer Products Operations



                                            Three months ended           Six months ended
                                               November 30,                November 30,
  In thousands except per unit              2008           2007         2008          2007
  Operating Results
  Total ready-mix concrete sales        $   64,832      $ 84,233     $ 143,726     $ 164,223
  Total other sales and delivery fees       15,812        13,798        32,142        28,334

  Total segment sales                       80,644        98,031       175,868       192,557
  Cost of products sold                     76,429        89,839       168,173       175,559

  Gross profit                               4,215         8,192         7,695        16,998
  Selling, general and administrative       (3,716 )      (3,931 )      (8,031 )      (8,836 )
  Other income                                 180           346           565           522

  Operating Profit (Loss)               $      679      $  4,607     $     229     $   8,684

  Ready-mix concrete
  Shipments (cubic yards)                      769         1,050         1,716         2,048
  Prices ($/cubic yard)                 $    84.37      $  80.19     $   83.78     $   80.18
  Cost of sales ($/cubic yard)          $    81.96      $  75.18     $   81.52     $   74.55

Three months ended November 30, 2008

Operating profit for the three-month period ended November 30, 2008 was $0.7 million, a decrease of $3.9 million from the prior year period as construction activity declined in our market areas.

Total segment sales for the three-month period ended November 30, 2008 decreased $17.4 million as total ready-mix concrete sales were down $19.4 million. Total ready-mix concrete volumes decreased 27% from the prior year period and average prices increased 5%.

Cost of products sold for the three-month period ended November 30, 2008 decreased $13.4 million from the prior year period primarily due to lower shipments. Overall ready-mix concrete unit costs increased 9% from the prior year period primarily due to higher raw material costs, as well as higher distribution and transportation costs. Our raw material unit costs in the current period increased approximately 7% from the prior year period. Our cost of diesel fuel per gallon in the current period increased approximately 33% from the prior year period.

Selling, general and administrative expense for the three-month period ended November 30, 2008 decreased $0.2 million from the prior year period primarily due to lower incentive compensation expense.

Other income for the three-month period ended November 30, 2008 decreased $0.2 million from the prior year period as a result of lower gains from the routine sale of surplus operating assets.

Six months ended November 30, 2008

Operating profit for the six-month period ended November 30, 2008 was $0.2 million, a decrease of $8.5 million from the prior year period as construction activity declined in our market areas during the November 2008 quarter.

Total segment sales for the six-month period ended November 30, 2008 decreased $16.7 million as total ready-mix concrete sales were down $20.5 million. Total ready-mix concrete volumes decreased 16% from the prior year period and average prices increased 4%.

Cost of products sold for the six-month period ended November 30, 2008 decreased $7.4 million from the prior year period primarily due to lower shipments during the November 2008 quarter. Overall ready-mix concrete unit costs increased 9% from the prior year period primarily due to higher raw material costs, as well as higher distribution and transportation costs. Our raw material unit costs in the current period increased approximately 7% from the prior year period. Our cost of diesel fuel per gallon in the current period increased approximately 59% from the prior year period.

Selling, general and administrative expense for the six-month period ended November 30, 2008 decreased $0.8 million from the prior year period primarily due to lower incentive compensation expense.

Other income for the six-month period ended November 30, 2008 was comparable to the prior year period. Other income in the current period includes lease bonus payments of $0.2 million received upon the execution of oil and gas lease agreements on property we own in north Texas offsetting lower gains from the routine sales of surplus assets.

Unallocated Overhead and Other Income



                                          Three months ended        Six months ended
                                             November 30,             November 30,
   In thousands                            2008         2007        2008        2007

   Other income                            $   60       $  115      $  121      $  287
   Selling, general and administrative     (2,253 )     (2,173 )    (4,799 )    (4,484 )

                                          $(2,193 )    $(2,058 )   $(4,678 )   $(4,197 )

Unallocated overhead and other income relate primarily to certain environmental, engineering and other administrative operating activities not attributable to a specific segment.

Corporate



                                          Three months ended         Six months ended
                                             November 30,              November 30,
   In thousands                            2008         2007        2008         2007

   Other income                            $   560     $ 2,063     $ 2,745     $  2,738
   Selling, general and administrative      (1,051 )    (7,379 )    (3,001 )    (13,188 )

                                          $   (491 )   $(5,316 )   $  (256 )   $(10,450 )

Three months ended November 30, 2008

Other income for the three-month period ended November 30, 2008 decreased $1.5 million from the prior year period. The prior year period includes a gain of $0.8 million from the sale of corporate real estate and a bonus payment of $0.7 million received upon the execution of an oil and gas lease agreement on property formerly owned by us that was not associated with any business segment.

Selling, general and administrative expense for the three-month period ended November 30, 2008 decreased $6.3 million from the prior year period. The decrease was primarily the result of $1.4 million lower incentive compensation expense and $4.1 million lower stock-based compensation. Our incentive plans are based on financial performance. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on the average stock price at the end of each period until the awards are paid. The impact of changes in our stock price reduced stock-based compensation $4.6 million and $0.8 million during three-month periods ended November 30, 2008 and November 30, 2007, respectively.

Six months ended November 30, 2008

Other income for the six-month period ended November 30, 2008 was comparable to that of the prior year period. The current year period includes a bonus payment of $1.6 million received upon the execution of an oil and gas lease agreement on property we own in north Texas that is not associated with any business segment. The prior year period includes a gain of $0.8 million from the sale of corporate real estate and a bonus payment of $0.7 million received upon the execution of an oil and gas lease agreement on property formerly owned by us but not associated with any business segment.

Selling, general and administrative expense for the six-month period ended November 30, 2008 decreased $10.2 million from the prior year period. The decrease was primarily the result of $3.8 million lower incentive compensation expense and $6.5 million lower stock-based compensation. Our incentive plans are based on financial performance. Our stock-based compensation includes awards expected to be settled in cash, the expense for which is based on the average stock price at the end of each period until the awards are paid. The impact of changes in our stock price reduced stock-based compensation $9.7 million and $3.8 million during six-month periods ended November 30, 2008 and November 30, 2007, respectively.

Interest

Interest expense incurred for the three-month period ended November 30, 2008 was $12.5 million, of which $3.2 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $9.3 million was expensed. Interest expense incurred for the three-month period ended November 30, 2007 was $7.2 million, all of which was capitalized in connection with our Hunter, Texas and Oro Grande, California cement plant expansion projects.

Interest expense incurred for the six-month period ended November 30, 2008 was $21.5 million, of which $5.0 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $16.5 million was expensed. Interest expense incurred for the six-month period ended November 30, 2007 was $13.3 million, all of which was capitalized in connection with our Hunter, Texas and Oro Grande, California cement plant expansion projects.

Interest expense incurred for the three-month and six-month periods ended November 30, 2008 increased from the prior year periods $5.3 million and $8.2 million, respectively. The increases were due to higher average outstanding debt and borrowings on life insurance contracts. An additional $9.1 million in interest expense is currently estimated to be capitalized in connection with our Hunter expansion project during the remainder of our current fiscal year.

Loss on Debt Retirements

On August 18, 2008, we sold $300 million aggregate principal amount of additional 7.25% senior notes due in 2013 at an offering price of $93.25. The net proceeds were used to repay our $150 million senior term loan and borrowings outstanding under our senior revolving credit facility in the amount of $29.5 million. We recognized a loss on debt retirement of $0.9 million representing a write-off of debt issuance costs associated with the mandatory prepayment of the term loan.

Income Taxes

Income taxes for the interim periods ended November 30, 2008 and November 30, 2007 have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% federal statutory corporate rate is due to percentage depletion that is tax deductible, state income taxes and deductions for income from qualified domestic production activities. Our estimated effective tax rate for fiscal year 2009 is 28.3% compared to 31.2% for fiscal year 2008.

LIQUIDITY AND CAPITAL RESOURCES

In addition to cash and cash equivalents of $62.3 million at November 30, 2008, our sources of liquidity include cash from operations and borrowings available under our $200 million senior secured revolving credit facility.

Senior Secured Revolving Credit Facility. On November 21, 2008, we amended our August 15, 2007 credit agreement to, among other things, increase the permitted leverage ratio, secure our obligations under the credit facility and limit the amount that can be borrowed under the credit agreement to the lesser of a borrowing base equal to the sum of 80% of our accounts receivable and 50% of our inventory or the $200 million stated principal amount of the credit agreement. The credit facility expires on August 15, 2012. The borrowing base at November 30, 2008 was $170.8 million. It includes a $50 million sub-limit for letters of credit. Any outstanding letters of credit are deducted from the borrowing availability under the facility. No borrowings were outstanding at November 30, 2008; however, $21.5 million of the facility was utilized to support letters of credit. Amounts drawn under the facility bear interest either at the LIBOR rate plus a margin of 2.5% to 3.5%, or at a base rate (which is the higher of the federal funds rate plus 0.5%, the prime rate or the one-month LIBOR rate plus 1.0%) plus a margin of 1.5% to 2.5%. The interest rate margins are subject to adjustments based on our leverage ratio. Commitment fees are payable currently at an annual rate of 0.5% on the unused portion of the facility. We may terminate the facility at any time.

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

The credit facility contains covenants restricting, among other things, prepayment or redemption of the senior notes, distributions, dividends and repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. Cash dividends paid on our common stock are limited to an annual amount of $10.0 million. We are required to comply with certain financial tests and to maintain certain financial ratios, such as leverage and interest coverage ratios. We were in compliance with all of these loan covenants as of November 30, 2008.

Contractual Obligations. On August 18, 2008, we sold $300 million aggregate principal amount of additional 7.25% senior notes due in 2013 at an offering price of 93.25%. The additional notes were issued under our existing indenture dated July 6, 2005. The net proceeds were used to repay our $150 million senior term loan and borrowings outstanding under our senior secured revolving credit facility in the amount of $29.5 million, with additional proceeds available for general corporate purposes. The following is a summary of our estimated additional future payments as a result of this new commitment, net of obligations prepaid out of the proceeds of the sale, for fiscal year periods subsequent to May 31, 2008.

                                                          Future Payments by Period
In thousands                        Total        2009        2010        2011       2012-2013     After 2013

Borrowings
New long-term debt                $ 300,000     $   --      $   --      $   --      $     --        $300,000
Interest                            108,750      10,875      21,750      21,750        43,500         10,875
Effect of Prepayments
Long-term debt                     (150,000 )       --          --          --       (150,000 )          --
Interest                            (22,835 )    (5,375 )    (6,514 )    (5,752 )      (5,194 )          --

                                  $ 235,915     $ 5,500     $15,236     $15,998     $(111,694 )     $310,875

In October 2007, we commenced construction on a project to expand our Hunter, Texas cement plant. We are expanding the Hunter plant by approximately 1.4 million tons of advanced dry process annual cement production capacity. The 900,000 tons of existing annual cement production capacity will remain in operation. As of November 30, 2008, we have expended $193.4 million, excluding capitalized interest of $6.9 million related to the project.

In light of current economic and market conditions we plan to delay construction on the project. We believe that if the project were completed when originally scheduled, cement demand levels in Texas would likely not permit the new kiln to operate at a profitable level. We do expect the demand for cement to rebound in the future and to resume construction on the project when warranted by future economic and market conditions. We expect to be able to begin the startup and commissioning of the project within 12 months after resumption of construction.

The delay is expected to begin in the May 2009 quarter at which time we expect to have expended approximately $300 million, excluding capitalized interest of approximately $16 million related to the project. The delay is expected to defer approximately $40 million to $60 million of capital expenditures.

In July 2008, we negotiated three contracts for the purchase of coal for use in our cement and expanded shale and clay lightweight aggregate plants in Texas beginning with calendar year 2009. Each contract requires that we must purchase all of our coal requirements at a fixed price (escalated annually) through calendar year 2011. In September 2008, we negotiated a contract for the purchase of coal for use in our Oro Grande, California cement plant beginning in June . . .