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                        Nine months ended
                                       February 28,         February 29,         February 28,         February 29,
In thousands except per unit               2009                 2008                 2009                 2008

Operating Results
Total cement sales                     $       75,557      $       103,891      $       285,368      $       349,900
Total other sales and delivery fees             5,882                9,249               25,482               25,684

Total segment sales                            81,439              113,140              310,850              375,584
Cost of products sold                          67,919               85,983              266,682              288,662

Gross profit                                   13,520               27,157               44,168               86,922
Selling, general and administrative            (2,788 )             (3,190 )            (12,830 )            (12,142 )
Other income                                    1,399                  753                7,550                2,258

Operating Profit                       $       12,131      $        24,720      $        38,888      $        77,038


Cement
Shipments (tons)                                  837                1,142                3,139                3,751
Prices ($/ton)                         $        90.17      $         91.01      $         90.90      $         93.28
Cost of sales ($/ton)                  $        73.92      $         67.13      $         77.76      $         70.38

Three months ended February 28, 2009

Operating profit for the three-month period ended February 28, 2009 was $12.1 million, a decrease of $12.6 million from the prior year period.

Total cement sales for the three-month period ended February 28, 2009 decreased $28.3 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 74% of total cement sales in the current period compared to 71% of total cement sales in the prior year period. In our Texas market area, cement shipments decreased 28% from the prior year period and average prices increased 4%. In our California market area, cement shipments decreased 24% from the prior year period and average prices decreased 14%.

Cost of products sold for the three-month period ended February 28, 2009 decreased $18.1 million from the prior year period. The effect of lower shipments and lower labor, supply and maintenance costs was partially offset by higher depreciation at our Oro Grande, California cement plant and higher coal costs. Cement unit costs increased 10% from the prior year period primarily due to lower production levels.

Selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $0.4 million from the prior year period primarily due to lower insurance expense offset in part by higher legal and other professional expenses.

Other income for the three-month period ended February 28, 2009 was comparable to the prior year period.

Nine months ended February 28, 2009

Operating profit for the nine-month period ended February 28, 2009 was $38.9 million, a decrease of $38.2 million from the prior year period.

Total cement sales for the nine-month period ended February 28, 2009 decreased $64.5 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 and February 2009 quarters. Our Texas area accounted for approximately 71% of total cement sales in the current period compared to 66% of total cement sales in the prior year period. In our Texas market area, cement shipments decreased 16% from the prior year period and average prices increased 3%. In our California market area, cement shipments decreased 18% from the prior year period and average prices decreased 13%.

Cost of products sold for the nine-month period ended February 28, 2009 decreased $22.0 million from the prior year period. The effect of lower shipments and lower labor, supply and maintenance costs was partially offset by higher depreciation at our Oro Grande, California cement plant and higher coal costs. Cement unit costs increased 10% from the prior year period primarily due to lower production levels.

Selling, general and administrative expense for the nine-month period ended February 28, 2009 increased $0.7 million from the prior year period primarily due to higher legal and other professional expenses offset in part by lower insurance expense and incentive compensation expense.

Other income for the nine-month period ended February 28, 2009 increased $5.3 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                        Nine months ended
                                       February 28,        February 29,         February 28,         February 29,
In thousands except per unit               2009                2008                 2009                 2008

Operating Results
Total stone, sand and gravel sales     $       26,889      $       37,699      $       103,235      $       120,827
Total other sales and delivery fees            25,882              28,124               81,838               89,104

Total segment sales                            52,771              65,823              185,073              209,931
Cost of products sold                          43,691              57,124              153,905              171,776

Gross profit                                    9,080               8,699               31,168               38,155
Selling, general and administrative            (2,379 )            (3,808 )             (9,708 )            (11,595 )
Other income                                    5,466                  76                6,336                  719

Operating Profit                       $       12,167      $        4,967      $        27,796      $        27,279


Stone, sand and gravel
Shipments (tons)                                3,267               5,010               13,073               16,424
Prices ($/ton)                         $         8.23      $         7.52      $          7.90      $          7.36
Cost of sales ($/ton)                  $         7.23      $         6.92      $          6.55      $          6.00

Three months ended February 28, 2009

Operating profit for the three-month period ended February 28, 2009 was $12.2 million, an increase of $7.2 million from the prior year period.

Total segment sales for the three-month period ended February 28, 2009 decreased $13.1 million from the prior year period as total stone, sand and gravel sales were down $10.8 million. Total stone, sand and gravel shipments decreased 35% from the prior year period and average prices increased 9%.

Cost of products sold for the three-month period ended February 28, 2009 decreased $13.4 million from the prior year period as labor hours were reduced in response to lower shipments and supplies and maintenance costs declined. Stone, sand and gravel unit costs increased 4% and shipments declined 35% from the prior year period.

Selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $1.4 million from the prior year period primarily due to lower insurance expense and incentive compensation expense.

Other income for the three-month period ended February 28, 2009 increased $5.4 million from the prior year period. Other income in the current period includes a gain of $5.0 million from the sale of real estate associated with our north Texas aggregate operations.

Nine months ended February 28, 2009

Operating profit for the nine-month period ended February 28, 2009 was $27.8 million, an increase of $0.5 million from the prior year period.

Total segment sales for the nine-month period ended February 28, 2009 decreased $24.9 million from the prior year period as total stone, sand and gravel sales were down $17.6 million. Total stone, sand and gravel shipments decreased 20% from the prior year period and average prices increased 7%.

Cost of products sold for the nine-month period ended February 28, 2009 decreased $17.9 million from the prior year period as labor hours were reduced in response to lower shipments and supplies and maintenance costs declined. Stone, sand and gravel unit costs increased 9% and shipments declined 20% from the prior year period.

Selling, general and administrative expense for the nine-month period ended February 28, 2009 decreased $1.9 million from the prior year period primarily due to lower insurance expense and incentive compensation expense.

Other income for the nine-month period ended February 28, 2009 increased $5.6 million from the prior year period. Other income in the current period includes a gain of $5.0 million from the sale of real estate associated with our north Texas aggregate operations.

Consumer Products Operations



                                                    Three months ended                            Nine months ended
                                            February 28,          February 29,           February 28,           February 29,
In thousands except per unit                    2009                  2008                   2009                   2008

Operating Results
Total ready-mix concrete sales           $          53,306     $          69,699     $          197,032     $          233,922
Total other sales and delivery fees                 13,294                12,361                 45,436                 40,695

Total segment sales                                 66,600                82,060                242,468                274,617
Cost of products sold                               60,569                78,361                228,742                253,920

Gross profit                                         6,031                 3,699                 13,726                 20,697
Selling, general and administrative                 (2,142 )              (4,755 )              (10,173 )              (13,591 )
Other income                                           651                   575                  1,216                  1,097

Operating Profit (Loss)                  $           4,540     $            (481 )   $            4,769     $            8,203


Ready-mix concrete
Shipments (cubic yards)                                614                   857                  2,330                  2,905
Prices ($/cubic yard)                    $           86.87     $           81.26     $            84.59     $            80.50
Cost of sales ($/cubic yard)             $           80.45     $           79.15     $            81.24     $            75.91

Three months ended February 28, 2009

Operating profit for the three-month period ended February 28, 2009 was $4.5 million, an increase of $5.0 million from the prior year period.

Total segment sales for the three-month period ended February 28, 2009 decreased $15.5 million as total ready-mix concrete sales were down $16.4 million. Total ready-mix concrete volumes decreased 28% from the prior year period and average prices increased 7%.

Cost of products sold for the three-month period ended February 28, 2009 decreased $17.8 million from the prior year period as labor hours were reduced in response to lower shipments and supplies, maintenance and diesel costs declined. Overall ready-mix concrete unit costs increased 2% and volumes declined 28% from the prior year period.

Selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $2.6 million from the prior year period primarily due to lower insurance expense and incentive compensation expense.

Other income for the three-month period ended February 28, 2009 was comparable to the prior year period.

Nine months ended February 28, 2009

Operating profit for the nine-month period ended February 28, 2009 was $4.8 million, a decrease of $3.4 million from the prior year period.

Total segment sales for the nine-month period ended February 28, 2009 decreased $32.1 million as total ready-mix concrete sales were down $36.9 million. Total ready-mix concrete volumes decreased 20% from the prior year period and average prices increased 5%.

Cost of products sold for the nine-month period ended February 28, 2009 decreased $25.2 million from the prior year period as labor hours were reduced in response to lower shipments and supplies and maintenance costs declined. Overall ready-mix concrete unit costs increased 7% 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 5% from the prior year period. Our cost of diesel fuel per gallon in the current period increased approximately 30% from the prior year period.

Selling, general and administrative expense for the nine-month period ended February 28, 2009 decreased $3.4 million from the prior year period primarily due to lower insurance expense and incentive compensation expense.

Other income for the nine-month period ended February 28, 2009 was comparable to the prior year period.

Unallocated Overhead and Other Income



                                              Three months ended                       Nine months ended
                                       February 28,        February 29,        February 28,        February 29,
In thousands                               2009                2008                2009                2008

Other income                           $           24      $          137      $          145      $          424
Selling, general and administrative            (4,888 )            (2,845 )            (9,687 )            (7,329 )

                                       $       (4,864 )    $       (2,708 )    $       (9,542 )    $       (6,905 )

Unallocated overhead and other income relate primarily to certain environmental, engineering and other administrative operating activities not attributable to a specific segment. Unallocated selling, general and administration expense for the three-month and nine-month periods ended February 28, 2009 increased from the prior year periods $2.0 million and $2.4 million, respectively, primarily due to increased insurance expense for undeveloped claims.

Corporate



                                              Three months ended                       Nine months ended
                                       February 28,        February 29,        February 28,         February 29,
In thousands                               2009                2008                2009                 2008

Other income                           $          404      $          545      $        3,149      $         3,283
Selling, general and administrative            (3,785 )            (6,119 )            (6,786 )            (19,307 )

                                       $       (3,381 )    $       (5,574 )    $       (3,637 )    $       (16,024 )

Three months ended February 28, 2009

Other income for the three-month period ended February 28, 2009 was comparable to the prior year period.

Corporate selling, general and administrative expense for the three-month period ended February 28, 2009 decreased $2.3 million from the prior year period. The decrease was primarily the result of $1.7 million lower incentive compensation expense and $0.8 million lower retirement expense. Stock-based compensation was comparable to the prior year period. 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 $2.4 million and $2.8 million during three-month periods ended February 28, 2009 and February 29, 2008, respectively.

Nine months ended February 28, 2009

Other income for the nine-month period ended February 28, 2009 was comparable to the prior year period. The current nine-month 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 nine-month period includes a gain of $1.1 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.

Corporate selling, general and administrative expense for the nine-month period ended February 28, 2009 decreased $12.5 million from the prior year period. The decrease was primarily the result of $5.5 million lower incentive compensation expense and $6.4 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 $12.1 million and $6.6 million during nine-month periods ended February 28, 2009 and February 29, 2008, respectively.

Interest

Interest expense incurred for the three-month period ended February 28, 2009 was $13.0 million, of which $4.7 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $8.3 million was expensed. Interest expense incurred for the three-month period ended February 29, 2008 was $7.5 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 nine-month period ended February 28, 2009 was $34.6 million, of which $9.7 million was capitalized in connection with our Hunter, Texas cement plant expansion project and $24.9 million was expensed. Interest expense incurred for the nine-month period ended February 29, 2008 was $20.8 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 nine-month periods ended February 28, 2009 increased from the prior year periods $5.5 million and $13.8 million, respectively. The increases were due to higher average outstanding debt and borrowings on life insurance contracts. An additional $4.4 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 February 28, 2009 and February 29, 2008 have been included in the accompanying financial statements on the basis of an estimated annual rate. The estimated annualized rate does not include the tax benefit of separately stated items in the amount of $0.6 million in the interim periods ended February 28, 2009. 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 25.5% compared to 31.1% for fiscal year 2008.

LIQUIDITY AND CAPITAL RESOURCES

In addition to cash and cash equivalents of $33.9 million at February 28, 2009, 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 February 28, 2009 was $158.5 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 February 28, 2009; however, $22.4 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 highest of (a) the federal funds rate plus 0.5%, (b) the prime rate and (c) 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 February 28, 2009.

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 February 28, 2009, we have expended $247.0 million, excluding capitalized interest of $11.6 million related to the project.

In light of current economic and market conditions, we are delaying completion of the project. We believe it is likely that cement demand levels in Texas will . . .