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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION






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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934




|                                            |                               
|------------------------------------------- | ------------------------------
|For the fiscal year ended December 31, 2001 | Commission File Number 0-11936



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Lafarge North America Inc.

|                                                                                                  |  |                                               
|------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|Incorporated in Maryland
	12950 Worldgate Dr., Suite 500
	Herndon, Virginia 20170
	(703) 480-3600 |  | I.R.S. Employer Identification No.
	58-1290226

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

|                                        |  |                                                          
|--------------------------------------- |  | ---------------------------------------------------------
|Title of Each Class                     |  | Name of Each Exchange on Which Registered                
|                                        |  |                                                          
|Common Stock, par value $1.00 per share |  | New York Stock Exchange, Inc.
	The Toronto Stock Exchange

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

None

Indicate by check mark whether the company (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 company was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x
No o

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulations S-K is not contained
herein, and will not be contained, to the best of company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. o

The aggregate market value of the voting stock held by
nonaffiliates of the company at March 12, 2002 was
$1,404,027,000.

There were 68,336,681 shares of Common Stock and 4,209,963
Exchangeable Preference Shares of our subsidiary, Lafarge Canada
Inc., outstanding as of March 12, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our definitive Proxy Statement for the 2002 Annual
Meeting of Stockholders, to be filed with the Securities and
Exchange Commission, are incorporated by reference in
Part III of this Annual Report on Form 10-K as
indicated herein.









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TABLE OF CONTENTS



|                                                                                              |                                   |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | --------------------------------- |  |  |  |  |  |  | 
|PART I                                                                                       
|Item 1. BUSINESS                                                                             
|                                                                                              | Executive Officers of the Company
|Item 2. PROPERTIES                                                                           
|Item 3. LEGAL PROCEEDINGS                                                                    
|Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II                                                                                      
|Item 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                         
|Item 6. SELECTED CONSOLIDATED FINANCIAL DATA                                                 
|Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|MANAGEMENTS DISCUSSION OF INCOME                                                            
|Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                                     
|Item 11. EXECUTIVE COMPENSATION                                                              
|Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|Supplemental Agreement Regarding Employees                                                   
|Subsidiaries of the Company                                                                  
|Consent of Arthur Andersen LLP                                                               
|Letter to Commission                                                                         



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LAFARGE NORTH AMERICA INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED


DECEMBER 31, 2001


TABLE OF CONTENTS

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|PART I  
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|Item 1.  |  | Business                                                                               |  |      | 1  | 
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|         |  | Executive Officers of the Company                                                      |  |      | 26 | 
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|Item 2.  |  | Properties                                                                             |  |      | 28 | 
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|Item 3.  |  | Legal Proceedings                                                                      |  |      | 29 | 
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|Item 4.  |  | Submission of Matters to a Vote of Security
	Holders                                   |  |      | 30 | 
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|PART II 
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|Item 5.  |  | Market for our Common Equity and Related
	Stockholder Matters                          |  |      | 30 | 
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|Item 6.  |  | Selected Consolidated Financial Data                                                   |  |      | 31 | 
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|Item 7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |      | 32 | 
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|Item 7A. |  | Quantitative and Qualitative Disclosures About
	Market Risk                            |  |      | 49 | 
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|Item 8.  |  | Financial Statements and Supplementary Data                                            |  |      | 51 | 
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|Item 9.  |  | Changes In and Disagreements with Accountants on
	Accounting and Financial Disclosure  |  |      | 85 | 
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|PART III
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|Item 10. |  | Directors and Executive Officers of the Company                                        |  |      | 86 | 
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|Item 11. |  | Executive Compensation                                                                 |  |      | 86 | 
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|Item 12. |  | Security Ownership of Certain Beneficial Owners
	and Management                        |  |      | 86 | 
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|Item 13. |  | Certain Relationships and Related Transactions                                         |  |      | 86 | 
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|PART IV 
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|Item 14. |  | Exhibits, Financial Statement Schedules and
	Reports on Form 8-K                       |  |      | 87 | 
|        
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|         |  | Signatures                                                                             |  |      | 91 | 

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FORWARD-LOOKING STATEMENTS

Statements we make in this Annual Report on Form 10-K that
are not historical facts are forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are not
guarantees of future performance and involve risks,
uncertainties and assumptions (Factors) that are
difficult to predict. Factors that could cause our actual
results to differ materially from those in the forward-looking
statements include, but are not limited to:



|  |                                                                                       
|- | --------------------------------------------------------------------------------------
| | the cyclical nature of our business                                                   
| 
| | national and regional economic conditions in the U.S. and Canada                      
| 
| | Canadian currency fluctuations                                                        
| 
| | seasonality of our operations                                                         
| 
| | levels of construction spending in major markets                                      
| 
| | supply/demand structure of our industry                                               
| 
| | competition from new or existing competitors                                          
| 
| | unfavorable weather conditions during peak construction periods                       
| 
| | changes in and implementation of environmental and other
	governmental regulations    
| 
| | our ability to successfully identify, complete and efficiently
	integrate acquisitions
| 
| | our ability to successfully penetrate new markets                                     

In general, we are subject to the risks and uncertainties of the
construction industry and of doing business in the U.S. and
Canada. The forward-looking statements are made as of the date
of this report, and we undertake no obligation to update them,
whether as a result of new information, future events or
otherwise.

Throughout this discussion, when we refer to Lafarge, us, we or
our, we mean Lafarge North America Inc. and its subsidiaries.
Our executive offices are located at 12950 Worldgate Drive,
Suite 500, Herndon, Virginia 20170, and our telephone
number is (703) 480-3600.




PART I




Item 1.  BUSINESS

Who are we?

Lafarge North America Inc., together with its subsidiaries, is
the largest supplier of cement and ready-mixed concrete in the
U.S. and Canada. We are also one of the top four producers of
construction aggregate (crushed stone, sand and gravel) and a
leading manufacturer of gypsum drywall. We have over 1,000
operations doing business in most states and throughout Canada,
where we conduct our business through our subsidiary, Lafarge
Canada Inc. Additionally, we entered into an agreement in
mid-2001 with Lafarge S.A., our majority shareholder, to manage
and operate approximately 100 cement and construction materials
businesses in the U.S. These businesses, which we refer to as
the Managed Assets and which Lafarge S.A. obtained in the
acquisition of Blue Circle Industries PLC in July 2001, remain
the property of Lafarge S.A. and their operating results are
consolidated with Lafarge S.A.s results.

Our products are used in the construction of roads, hospitals,
department stores, sports stadiums, banks, museums, high-rise
apartments, amusement parks, swimming pools and bridges on which
the world depends. In 2001, excluding the Managed Assets, we
generated net sales of $3.3 billion and we shipped 121.0
million tons of aggregate, 11.5 million cubic yards of
ready-mixed concrete, 14.4 million tons of cement and
1.6 billion square feet of gypsum drywall.

Our geographic and product diversity, although essential to
increasing and maintaining our leadership in the industry, is
only part of Lafarge. The other essential part of our business
is the more than 15,000 people we employ. Our employees provide
customers with technical, engineering, research and customer
service support to create, use and implement special types and
applications of our products to meet specified structural and
stringent environmental demands.

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How are we organized; what do we make?

Our business is organized into three operating segments,
construction materials, cement and cement-related products, and
gypsum. Each represents a separately managed strategic business
unit with different capital requirements and marketing
strategies.



| |   |                       
| | - | ----------------------
| |  | Construction Materials



| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| |  | Produces and supplies aggregate;                                               
|
| |  | Produces and supplies ready-mixed concrete, concrete products
	and asphalt; and
|
| |  | Provides road paving and construction services.                                



| |   |                                   
| | - | ----------------------------------
| |  | Cement and Cement-Related Products



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Produces and distributes Portland and specialty cements; and              
|
| |  | Distributes cementitious materials such as fly ash, slag and
	silica fume.



| |   |       
| | - | ------
| |  | Gypsum



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | Produces and distributes a full line of gypsum drywall products
	for commercial and residential construction.

You may evaluate the financial performance of each of our
segments by reviewing Managements Discussion of
Income in Managements Discussion and Analysis of
Financial Condition and Results of Operations set forth under
Part II, Item 7 of this Annual Report and the Notes
to Consolidated Financial Statements  Segment and
Related Information in Financial Statements and
Supplementary Data set forth under Part II, Item 8 of this
Annual Report, which are incorporated herein by reference.

What is the Lafarge Group?

We are part of the Lafarge Group, which includes Lafarge S.A.
and its consolidated subsidiaries. Lafarge S.A., a French
Company, and its affiliates hold approximately 54 percent
of our common stock. The Lafarge Group is the world leader in
building materials, holding top-ranking positions in all four of
its divisions: cement; aggregates and concrete; roofing; and
gypsum. The Lafarge Group employs approximately 83,000 people in
75 countries. In 2001, the Lafarge Group generated sales in
excess of $12 billion.

Among other things, the Lafarge Group provides marketing,
technical, research and development, and managerial assistance
to us. For example, the Lafarge Groups 30-year experience
in the gypsum business and building new plants around the world
supported our entry into the gypsum industry.

How our Company developed

|     |  |                                                                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1956 |  | Our majority shareholder, Lafarge S.A., entered
	the North American cement market by building a cement plant in
	Richmond, British Columbia and forming Lafarge Cement North
	America.
|1970 |  | Lafarge S.A. acquired Canada Cement Company (now
	Lafarge Canada Inc., our Canadian subsidiary), already
	Canadas largest cement producer.                                           
|1974 |  | Lafarge Canada entered the U.S. market through a
	joint venture to operate three U.S. cement plants.                                                                                  
|1977 |  | Although the joint venture terminated, we were
	incorporated in Maryland in 1977 as Citadel Cement Corporation
	of Maryland and operated two of the three U.S. cement plants.         
|1981 |  | Lafarge Canada acquired the common stock of
	General Portland Inc., the second largest cement producer in the
	U.S. at that time.                                                     
|1983 |  | A corporate reorganization established us as the
	parent of Lafarge Canada and General Portland. We completed our
	initial public offering of common stock.                           

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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1986 |  | We acquired National Gypsums Huron Cement
	Division, consisting of the Alpena, Michigan cement plant (North
	Americas largest cement plant), 13 inland cement terminals
	and several Great Lakes distribution facilities. We also
	acquired Systech Environmental Corporation, which processes
	fuel-quality waste and alternative raw materials for use in our
	cement kilns.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|1989 |  | We acquired 32 plant facilities in five states
	and mineral reserves from Standard Slag Holding Company,
	significantly expanding our construction materials operations in
	the U.S.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|1991 |  | We acquired three cement plants, 15 cement
	terminals, two quarries and more than 30 ready-mixed concrete
	and aggregate operations in the Mississippi River Basin when we
	acquired Missouri Portland Cement Company and Davenport Cement
	Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|1993 |  | We divested our Alabama cement assets and
	implemented new organizational structures in cement and
	construction materials to improve efficiency of our operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|1994 |  | We divested our Texas assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1995 |  | We acquired National Portland Cements
	600,000 ton capacity cement grinding plant in Port Manatee,
	Florida.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1996 |  | We entered the North American gypsum market when
	we bought two gypsum drywall plants located in Buchanan, New
	York and Wilmington, Delaware, creating our new operating
	segment, Lafarge Gypsum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|1997 |  | We began work on new state-of-the-art cement
	manufacturing plants to replace existing facilities in Richmond,
	British Columbia and Sugar Creek, Missouri. The Richmond plant,
	completed in 1999, increased annual clinker production capacity
	from approximately 600,000 tons to 1.1 million tons. The
	Sugar Creek plant and underground limestone mine, expected to be
	fully operational in the first half of 2002, should have a rated
	capacity of 900,000 tons of cement a year.                                                                                                                                                                                                                                                                                                                                                                   
|1998 |  | We finalized the largest acquisition in our
	history when we bought the construction materials businesses of
	Denver, Colorado based Western Mobile, Inc.; Redland Genstar
	Inc. of Towson, Maryland; and the Ontario and New York based
	aggregate operations of Redland Quarries Inc. from Lafarge S.A.
	for $690 million. This acquisition, which we refer to as
	Redland, made Lafarge the largest diversified supplier of
	construction materials in North America. We also acquired a
	cement plant in Seattle, Washington, two cement distribution
	facilities (one of which we subsequently sold) and a limestone
	quarry in British Columbia from Holnam, Inc.                                                                                                                                                                                      
|1999 |  | We acquired the Atlantic Group Limited, a
	Newfoundland gypsum drywall manufacturing plant and Atlantic
	Gypsum Resources, Inc., a Newfoundland gypsum quarry. We began
	construction of a state-of-the-art drywall manufacturing plant
	in Silver Grove, Kentucky, which became operational in June
	2000. We also broke ground on an almost identical drywall
	manufacturing plant in Palatka, Florida, which became
	operational in January 2001. These plants are the largest single
	line drywall production facilities in the U.S. and have a
	combined estimated annual capacity of 1.8 billion square
	feet of 1/2-inch drywall, tripling our then existing drywall
	capacity. The plants were built to satisfy 100 percent of
	their primary raw material requirements by using recycled
	materials, including reclaimed paper and synthetic gypsum.
|2000 |  | We acquired the Presque Isle Corporation, a
	Michigan-based quarry operation. We also completed a merger with
	the Warren Paving & Materials Group, at the time
	Canadas largest privately held supplier of construction
	aggregate. The Warren merger added 23 aggregate operations and
	55 asphalt plants in British Columbia, Alberta, Saskatchewan,
	Ontario and Quebec. These acquisitions added 2 billion tons
	of aggregate reserves and over 25 million tons of annual
	sales volume.                                                                                                                                                                                                                                                                                                                                                               

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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2001 |  | In July 2001, we entered into an agreement with
	Lafarge S.A. to manage and operate certain U.S. cement and
	construction materials businesses that Lafarge S.A. obtained in
	its acquisition of U.K.-based Blue Circle Industries PLC on that
	date. The agreement grants us management authority for most of
	Blue Circles U.S. business, which includes five full
	production cement manufacturing plants, 11 cement terminals, a
	slag grinding facility, 13 aggregate-producing pits and
	quarries, 61 ready-mixed concrete plants and several concrete
	block operations. The agreement provides for a fixed annual
	management fee plus incentives for improving operating results,
	and includes an option to purchase the assets anytime between
	July 2002 and December 2004 at a fixed price subject to certain
	adjustments at the time of the exercise. In addition to the
	assets covered under the management contract, we also purchased
	several Blue Circle construction material assets outright. These
	businesses include four sand and gravel operations in Ontario
	and one near Buffalo, New York, which have more than
	2.5 million tons of sales annually, two ready-mixed
	concrete plants in Ontario and a cold patch asphalt business
	with operations in Canada and the U.S.
|     |  | Also in 2001, we purchased substantially all of
	the assets of Pine Hill Materials Corp. and American Readi-Mix
	Concrete Corporation, New York-based construction materials
	companies. We also acquired Rocky Mountain Construction
	Materials, an aggregate and ready-mixed concrete company based
	in Colorado; and several other smaller operations throughout
	North America. These acquisitions are expected to increase our
	annual production by over 2 million tons of aggregate and
	500,000 cubic yards of ready-mixed concrete.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

What were our acquisitions and capital
improvements in 2001?

In July 2001, we purchased for $14.3 million certain of
Blue Circle Industries PLCs North American assets from
Lafarge S.A. Those businesses include sand and gravel operations
in Ontario and near Buffalo, New York, two Ontario ready-mixed
concrete plants and a cold patch asphalt business with
operations in Canada and the U.S. Additionally, we completed
other acquisitions in 2001 totaling $66.3 million. These
acquisitions included the February 2001 purchase of
substantially all of the assets of Pine Hill Materials Corp. and
American Readi-Mix Concrete Corporation, New York-based
construction materials companies, and in June 2001, Rocky
Mountain Construction Materials, an aggregate and ready-mixed
concrete company based in Colorado. In July 2001, we obtained an
option to acquire specific cement and construction materials
businesses in the U.S. from Lafarge S.A., who obtained these
assets in its acquisition of Blue Circle Industries PLC. We
agreed to manage and operate these assets, which remain the
property of Lafarge S.A. and the operating results of which are
consolidated with Lafarge S.As results, not ours.

Our business is relatively capital-intensive. During the
three-year period ended December 31, 2001, our capital
expenditures approximated $1,081 million, principally for
the construction of new facilities and the modernization or
replacement of existing equipment. Of this amount, construction
materials, cement and cement-related products, and gypsum
expended approximately 29 percent, 45 percent and
21 percent, respectively. During the same period, we also
invested approximately $509 million in various acquisitions
that expanded our market and product lines. Of this amount,
construction materials, cement and cement-related products, and
gypsum expended approximately 98 percent, 1 percent
and 1 percent, respectively. During the three-year period
ended December 31, 2001, operating cash flows and
divestment proceeds totaled $1.5 billion.

In 2001, operating cash flows and divestment proceeds totaled
$489 million, while investments (capital expenditures and
acquisitions) reached $414 million. During 2001, proceeds
from the sale of non-strategic assets, surplus land and other
miscellaneous items totaled $66 million, consisting
principally of the disposal of our joint venture interest in
Centennial Concrete Pipe & Products and non-strategic
ready-mixed concrete businesses in Milwaukee, Wisconsin.

In 2002, we expect capital expenditures to total approximately
$350 million to $400 million, excluding acquisitions.
We intend to invest in projects that maintain or improve the
performance of our plants, as well as in acquisition
opportunities that will enhance our ability to compete. The 2002
capital expenditures will include the completion of slag
production and grinding operations in Chicago and the Sugar
Creek, Missouri

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What is our business strategy?

Our core business strategy is to be defined by four fundamental
elements  growth and development, operational
excellence, commitment to changeand teamwork.



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Growth and Development, both through acquisitions and
	internal development, is one of our highest priorities. In 2001,
	we strengthened our competitive position through acquisitions
	and capital improvements in each of our three segments:
	construction materials, cement and cement-related products, and
	gypsum. These acquisitions and capital improvements are
	discussed previously in this Annual Report under What were
	our acquisitions and capital improvements in 2001?
	Further, in 2001 we obtained an option to acquire specific
	cement and construction materials businesses in the U.S. and
	Canada from Lafarge S.A., who obtained these assets in the
	acquisition of Blue Circle Industries PLC. We have agreed to
	manage and operate these assets (for a minimum annual fee of
	$12 million), making us the leading cement and slag
	supplier in the U.S. as well as in Canada.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our basic objective is to maintain a strong balance sheet with
	sufficient flexibility to capitalize on opportunities when they
	arise. Our ratio of long-term debt to total capitalization has
	decreased from 25.5 percent at the end of 1999 to
	21.7 percent in 2000 and 20.6 percent in 2001, levels well
	within our internal target range. We continue to pursue
	opportunities, particularly in aggregate and related activities.
	In fact, Lafarge has become one of North Americas top four
	aggregate producers as our sales reached 121 million tons in
	2001, 29 percent higher than in 2000 and three times the
	production level reached just five years earlier.



|  |                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | Operational Excellence encompasses the range of programs
	we have established for manufacturing efficiency, cost control
	and continuous improvement.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our vision of operational excellence includes common operating
	models, the rigorous application of best business practices and
	the implementation of management information systems to improve
	our operating performance. These types of programs remain
	priorities for all of our product lines and are supported at the
	corporate level through our Corporate Technical Services
	Department for the cement and cement-related products segment
	and our Business Performance Department in the construction
	materials segment.                                                                                                                                                                                                                                                                                                                                                                                            
|
| | Our commitment to operational excellence was demonstrated
	through our integration of the assets of Blue Circle that we
	agreed to manage. Throughout the second half of 2001, hundreds
	of employees from both organizations worked on integration teams
	to identify savings and synergies that we could capture by
	networking our manufacturing, distribution and sales systems and
	applying the best practices of both companies. Further, in our
	gypsum operations we have launched a program to improve
	manufacturing performance, making significant inroads by
	reducing fixed costs and raw materials, increasing line
	productivity, and supplying our own paper. Additionally, our
	construction materials operations are getting positive results
	from the across-the-board application of standardized operating
	models, focused both on revenue enhancement and cost reduction,
	in our almost 1,000 locations.
|
| | We have also developed a company-wide employee recognition
	program, the Presidents Award for Commitment to Excellence
	(PACE), to reward those who are leading the charge
	on innovation. In 2001, PACE awards were presented to individual
	employees and teams from around the company in recognition of
	their contributions that created value for the company and
	supported the strategic objectives of our business. The winning
	ideas captured a range of process improvements, ways to maintain
	and grow market share, and projects to capture savings through
	relatively simple, cost-effective fixes. In due course, we
	believe many of these ideas will be incorporated into best
	practices.                                                                                                                                                                                                                  

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|  |                                                                        
|- | -----------------------------------------------------------------------
| | Commitment to Change provides a third pathway to superior
	performance.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In light of the increased size of our cement and cement-related
	products operations arising from our agreement to manage Blue
	Circles U.S. assets, we determined that we needed to
	reorganize our cement operations. Consequently, we launched a
	new organizational structure for the cement and cement-related
	products operations with the creation of five smaller regions in
	the U.S. and Canada, compared to two larger ones as before. We
	believe that this move to a more decentralized organization will
	enable our employees to be much closer to their regional markets
	and customer base. Similarly, to leverage efficiencies and best
	practices across our enlarged operational landscape, we are
	currently studying the structure of our construction materials
	operations and expect to implement organizational changes.
|
| | We have a strong culture and our management principles have
	greatly contributed to our successes. With our explosive growth
	over the past several years, we decided a common roadmap to
	reinforce this culture and develop our management was needed.
	So, in 2000 we developed and launched a leadership profile
	program, with the aim to clarify and reinforce our management
	style and to develop the required talents for tomorrow. The
	leadership profile defines the six key competencies of the
	Lafarge manager (Driving For Results, Customer Focus, Integrity
	and Values, Leading Change, Vision and Purpose, and Leading
	People). We have put more than 1,100 managers through this
	intensive program to deploy the new performance enhancement
	tools.                                                                         
|
| | We continued to consistently advance our efforts in e-business
	throughout 2001. In 2000, we established a multi-disciplinary
	e-business team to define an enterprise-wide e-business
	strategy. Over the past year, this team has investigated
	numerous solutions, including an e-commerce site and
	e-procurement solutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



|  |                                                                                                    
|- | ---------------------------------------------------------------------------------------------------
| | Teamwork is the final element that guides how we will
	plan and execute our core business strategy.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There is a clear competitive advantage associated with being a
	large company, but only if we can capitalize on synergies
	between our three operating segments. This requires
	communications, collaboration and teamwork. For example,
	purchasing activities that were once highly decentralized are
	now coordinated across product lines, leveraging the buying
	power of a $3.3 billion company so we can achieve
	substantial, permanent savings.
|
| | Our goal is to create an atmosphere of common business values,
	in which employees are constantly looking for opportunities and
	risks that may impact not just their business but other Lafarge
	product lines or geographic areas as well.                                                                                                                                                                                                            

The Construction Materials Segment

Who are we?

We are the largest supplier of ready-mixed concrete in the U.S.
and Canada, and one of the top four producers of construction
aggregate in North America. Further, we became the largest
asphalt and paving operator in Canada after our merger with the
Warren Paving & Materials Group late in 2000. Additionally,
in mid-2001, under a management fee arrangement with our
majority shareholder, we began operating the ready-mixed
concrete and aggregate operations of the former Blue Circle
business in Georgia. Those operations under management account
for approximately 14 million tons of aggregate sales and
3.4 million cubic yards of concrete, as well as a large
concrete block business, the results of which are consolidated
with those of Lafarge S.A. Acquisitions and internal development
have led to a vastly larger organization from five years ago, as
we have nearly tripled net sales and have achieved a four-fold
increase in operating results.

Our U.S. construction materials operations are located primarily
in Colorado, New Mexico, Kansas, Louisiana, Missouri, Ohio,
Maryland, Pennsylvania, West Virginia and Michigan. In Canada,
we are the only producer of ready-mixed concrete and
construction aggregate with operations extending from coast to
coast. Our operations include ready-mixed concrete plants,
crushed stone and sand and gravel sites, and concrete product
and asphalt plants.

6



---



##### Table of Contents



During 2001, 2000 and 1999, our construction materials segment
accounted for 62 percent, 56 percent and
55 percent, respectively, of consolidated net sales, after
the elimination of intracompany sales, and 50 percent,
41 percent and 36 percent, respectively, of
consolidated gross profit.

We offer a broad range of products, including:



|  |                                                                                
|- | -------------------------------------------------------------------------------
| | Aggregate (crushed stone, sand or gravel) includes a full line
	of graded stone
| 
| | Concrete and masonry sand                                                      
| 
| | Slag aggregate                                                                 
| 
| | Asphalt for road paving and construction                                       
| 
| | Ready-mixed concrete                                                           
| 
| | Roller compacted concrete                                                      
| 
| | Gravity and pressure pipe                                                      
| 
| | Pipe couplings, pipeline weights and coatings                                  
| 
| | Concrete brick, block and paving stones                                        
| 
| | Reinforcing steel                                                              
| 
| | Dry bagged products                                                            
| 
| | Structural and architectural precast products                                  
| 
| | Concrete drainage systems                                                      
| 
| | Other building supplies                                                        

Aggregate is used as a base material in roads and buildings and
as raw material for concrete, masonry, asphalt and many
industrial processes. Our ready-mixed concrete (a blend of
aggregate, water and cement) is used for a variety of
applications from curbs and sidewalks to foundations, highways
and buildings.

Where are our aggregate, ready-mixed
concrete and concrete products facilities located?

In the U.S., we own or have a majority interest in approximately
200 construction materials locations at December 31, 2001,
including:



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 90 construction aggregate facilities, of which 38 percent
	are in Colorado, 16 percent in Ohio, 13 percent in New
	Mexico and the remainder in New York, Missouri, Pennsylvania,
	Maryland, West Virginia, Wisconsin, and Michigan;
|
| |  | 80 ready-mixed concrete plants, of which 31 percent are in
	Colorado, 20 percent in Missouri and 17 percent in
	Louisiana, with lesser concentrations in Maryland, New Mexico,
	New York, New Mexico and Wyoming;                  
|
| |  | 20 asphalt facilities concentrated in Colorado and New Mexico
	with the remaining plants in Maryland, Missouri, Pennsylvania,
	Arizona and Wyoming; and                                                                            
|
| |  | 10 paving facilities concentrated in Colorado, with the
	remaining facilities in New Mexico, Arizona and Wyoming.                                                                                                                  

We owned or had a majority or joint interest in approximately
680 construction materials facilities in Canada at
December 31, 2001, including:



| |   |                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 370 construction aggregate facilities, approximately 50 percent
	of which are located in Ontario and 31 percent in Alberta,
	while others are located throughout Quebec, Saskatchewan,
	British Columbia, Manitoba, Nova Scotia and New Brunswick;          
|
| |  | 170 ready-mixed concrete plants concentrated in the provinces of
	Ontario (where approximately 44 percent of the plants are
	located), Alberta, Quebec, New Brunswick and British Columbia
	and, to a lesser extent, Manitoba, Nova Scotia and Saskatchewan;
|
| |  | 70 asphalt facilities concentrated primarily in Ontario with the
	remainder in British Columbia, Alberta, Quebec, Nova Scotia,
	Saskatchewan and New Brunswick; and                                                                                         
|
| |  | 40 paving facilities, of which 49 percent are in Ontario
	and the remainder in British Columbia, Alberta, Nova Scotia,
	Quebec, New Brunswick and Saskatchewan.                                                                                             

7



---



##### Table of Contents



We own substantially all of our aggregate, ready-mixed concrete
and concrete products plants and believe that all of our plants
are in satisfactory operating condition.

Where do we get the raw materials for our
aggregate and ready-mixed concrete operations?

The aggregate business consists of the mining, extraction,
production and sale of stone, sand, gravel and lightweight
aggregate such as expanded shale and clay. Aggregate is employed
in virtually all types of construction, including highway
construction and maintenance.

The concrete business involves the mixing of cement with sand,
gravel, crushed stone or other aggregate and water to form
concrete which is subsequently marketed and distributed to
customers.

We own the majority of our aggregate quarries and pits, as well
as our facilities for production of ready-mixed concrete. We
believe our aggregate reserves are adequate at current
production levels. Moreover, even where our reserves are lower,
we believe that new sources of aggregate would be available and
obtainable without significant interruption to our business.

Who buys our aggregate, ready-mixed
concrete and concrete products?

Aggregate is sold primarily to road building contractors and
ready-mixed concrete producers. Ready-mixed concrete is sold
primarily to building contractors and delivered to construction
sites by mixer trucks. Precast concrete products and concrete
pipe are sold primarily to contractors engaged in all types of
construction activity.

The states in which we had our most significant U.S. sales
of construction materials in 2001 were Colorado, New Mexico and
Maryland. Other states in which we had significant sales of
construction materials included: Missouri, Ohio, Louisiana and
Wisconsin. In Canada, we had our most significant sales of
construction materials in Ontario, Alberta, British Columbia,
Manitoba and Quebec.

In 2001, no single unaffiliated customer accounted for more than
10 percent of our construction material sales.

How do we distribute products to our
customers?

The cost to transport aggregate, ready-mixed concrete and
concrete products is high, and consequently, producers are
typically limited to market areas within 100 miles of their
production facilities. We primarily utilize trucks and railroads
to transport aggregate and concrete products to our customers.
For our aggregate operations located on the Great Lakes and the
west coast, we can also take advantage of the relatively low
cost of waterborne transportation.

How do changes in the seasons and weather
affect our business?

Demand for aggregate, ready-mixed concrete and concrete products
is seasonal because construction activity usually diminishes
during the winter. Demand also may be adversely impacted by
unfavorable weather conditions, including hurricanes, for
example. Information with respect to quarterly financial results
is set fourth in Notes to Consolidated Financial
Statements  Quarterly Data (unaudited) in Part
II, Item 8, Financial Statements and Supplementary Data, of
this Annual Report, which is incorporated herein by reference.

Who are our competitors?

Most ready-mixed concrete local markets are highly competitive
and are served by both large multi-national companies as well as
many small producers. Most ready-mixed concrete companies employ
10 to 20 mixer trucks with annual sales in the $1.5 to
$3.0 million range. Large ready-mixed concrete producers
have over 300 mixer trucks. Some companies are vertically
integrated and also own cement plants and aggregate operations.

8



---



##### Table of Contents



Aggregate markets are also highly competitive and are made up of
numerous aggregate producers including large multi-national,
integrated producers and many small producers.

Demand for both aggregate and ready-mixed concrete depends
largely on regional levels of construction activity. Both the
aggregate and concrete industries are highly fragmented, with
numerous participants operating in localized markets. Both
aggregate and concrete products are sold in competition with
offerings by other suppliers of the same product and with
substitute products. The size of the market area for an
aggregate quarry and a ready-mixed concrete plant is similar;
therefore, the ability to compete is limited by the relatively
high cost of truck and rail transportation compared with the
value of the product. Proximity to customers is an important
criterion. Most sales of ready-mixed concrete and aggregate are
made on the basis of competitive prices in each market area,
generally pursuant to telephone orders from customers who
purchase quantities sufficient for their immediate requirements.
In addition to price, we compete on the basis of service and
reliability.

Customer Orders

Our sales of ready-mixed concrete and aggregate do not typically
involve long-term contractual commitments. In addition, we
believe our reserves of aggregate and inventories of products
are sufficient to fill customer orders in the normal course of
business.

The Cement and Cement-Related Products Segment

Who are we?

We are the largest producer of cement and cement-related
products in North America, after considering the Blue Circle
assets that we manage on behalf of Lafarge S.A. We operate North
Americas broadest cement distribution system by truck,
rail, barge and lake freighter. Our cement segment was formed by
combining several prominent North American cement
companies  Canada Cement Lafarge, General Portland,
National Gypsums Huron Cement division and the Missouri
Portland and Davenport Cement companies. We also significantly
expanded our cement operations in 2001 with our agreement to
manage most of the U.S. assets of Blue Circle Industries PLC,
which our majority shareholder, Lafarge S.A., acquired in
mid-2001.

We manufacture a diverse product line that includes basic
cements in both bulk and bags, including:



| |   |         
| | - | --------
| |  | Portland
|
| |  | Masonry 

And specialty cements that include:



| |   |                           
| | - | --------------------------
| |  | Oil well                  
|
| |  | Low alkali                
|
| |  | High early strength       
|
| |  | Moderate heat of hydration
|
| |  | Sulfate resistant cements 
|
| |  | Silica fume cement        

Our cements are used in every facet of residential,
institutional, commercial, industrial and public construction
from offices and homes to dams, factories, tunnels, roads,
highways and airports.

In addition, our wholly-owned subsidiary, Systech Environmental
Corporation, processes industrial hazardous and non-hazardous
waste for use as fuel substitutes for coal, natural gas and
petroleum coke used in heating cement kilns. Substitute fuels
preserve natural resources and manage selected waste materials,
while at the same time reducing fuel cost for manufacturing
cement. Waste-derived fuels supplied by Systech constituted
approximately 7 percent of all fuel used in our cement
operations during 2001.

9



---



##### Table of Contents



We also manage and market fly ash, a coal combustion product
residue produced by coal burning, electricity generating plants,
and slag, a ground byproduct of iron blast furnaces. One use of
fly ash is as a cement supplement (replacing a portion of the
Portland cement) to enhance the performance of concrete used in
large construction projects such as high-rise buildings, bridges
and parking garages. Processed slag also exhibits cement-like
properties and is being used increasingly in high-performance
concrete mixes and road pavements. We are a leading North
American supplier of fly ash and slag.

During 2001, 2000 and 1999 cement and cement-related products
accounted for 33 percent, 39 percent and
40 percent, respectively, of our consolidated net sales,
after the elimination of intracompany sales, and
56 percent, 58 percent and 56 percent, respectively,
of consolidated gross profit.

What are the Managed Assets?

On the cement side, the Managed Assets include five full
production cement manufacturing plants, 11 cement terminals and
a slag grinding facility. The following table indicates the
location, types of process and rated annual clinker production
capacity (based on managements estimates) of each of the
Managed Assets operating cement manufacturing plants at
December 31, 2001. The clinker production of a cement plant
might be less than its rated capacity due principally to product
demand and seasonal factors. Generally, a plants cement
production capacity is greater than its clinker production
capacity.

|                                                  |  |         |           |           |  |  |           | 
|------------------------------------------------- |  | ------- | --------- | --------- |  |  | --------- | 
|                                                  |  |         |           | Clinker  
|Location                                          |  | Process |           | Capacity*
|                                                  |  |         |           |          
|Ravena, New York                                  |  |         | Wet       |           |  |  | 1,958,000 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Harleyville, South Carolina                       |  |         | Wet       |           |  |  | 1,089,000 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Tulsa, Oklahoma                                   |  |         | Dry       |           |  |  | 710,000   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Roberta, Alabama                                  |  |         | Dry       |           |  |  | 665,000   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Atlanta, Georgia                                  |  |         | Dry       |           |  |  | 655,000   | 
|                                                  |  |         |           |           |  |  |           | 
|                                                 
|                                                 
|                                                 
|                                                 
|Total capacity                                    |  |         | 5,077,000 |          
|                                                  |  |         |           |          
|                                                 
|                                                 
|                                                 
|                                                 
|Total 2001 clinker production                     |  |         | 4,845,000 |          
|                                                  |  |         |           |          
|                                                 
|                                                 
|                                                 
|                                                 
|2001 production as a percentage of total capacity |  |         | 95        | %        
|                                                  |  |         |           |          




|  |                                                  
|- | -------------------------------------------------
|* | In short tons. One short ton equals 2,000 pounds.

For operating and managing the Blue Circle assets, including
ready-mixed concrete and aggregate businesses, we will be paid a
minimum annual fee of $12 million. The financial results of
these managed assets, on the other hand, are consolidated with
Lafarge S.A.s results and not ours.

How is cement made?

Processed cement was discovered by Joseph Aspdin in 1824 and was
called portland cement because it resembled a gray
stone mined from the island of Portland off the coast of
England. People often confuse cement with concrete. Cement is a
fine powder that is the principle strength-giving and
property-controlling component of concrete. Concrete is a
mixture of cement, aggregate and water that hardens to form a
building material used for everything from sidewalks to
skyscrapers.

While different types of cement vary in their ingredients, four
common elements are found in all types of cement. They are (from
most to least): calcium carbonates (limestone), silicates
(sand), argillaceous material (clay, shale or kaolin) and iron.

Cement is manufactured by a closely controlled chemical process:



| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | first, limestone, sand, clay and iron-rich materials are crushed
	and mixed;                                                                                                                                          
|
| |  | next, the crushed raw materials undergo a grinding process,
	which mixes the various materials more thoroughly and increases
	fineness in preparation for the kiln (this may be done by either
	a wet or dry process);

10



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | in the wet process, the materials are mixed with water to form
	slurry, which is heated in kilns, forming hard
	pellets called clinker;                                                                                                                            
|
| |  | in the more fuel efficient dry process, clinker is formed by
	heating the dry raw materials directly without adding water;                                                                                                                                             
|
| |  | in the preheater process, which provides further fuel
	efficiencies, dry raw materials are preheated by air exiting the
	kiln, starting the chemical reaction prior to entry of the
	materials into the kiln;                                                          
|
| |  | in the pre-calciner process, an extension of the preheater
	process, heat is applied to the raw materials, increasing the
	proportion of the chemical reaction taking place prior to
	heating in the kiln and, as a result, increases clinker
	production capacity; and
|
| |  | gypsum is added and the clinker is ground into an extremely fine
	powder called Portland cement, a binding agent that, when mixed
	with sand, stone or other aggregate and water, produces either
	concrete or mortar.                                                 

Where do we get the raw materials to make
cement?

We obtain the limestone required to manufacture cement
principally from operations we own or in which we have long-term
quarrying rights. These sources are located close to our
manufacturing plants except for the Joppa, Richmond and Seattle
quarries, which are located approximately 70, 80 and 180 miles,
respectively, from their plant sites. Quarried materials are
delivered to Joppa, Richmond and Seattle by barge. Each cement
manufacturing plant is equipped with rock crushing equipment. At
Joppa, we own the reserves, but lease the quarrying rights and
purchase limestone from the lessee. At Whitehall and Kamloops,
we subcontract the quarry operations. Lafarge Canada holds
cement manufacturing limestone quarry rights under quarry leases
in Quebec, Nova Scotia, Ontario, Alberta and British Columbia,
some of which require annual royalty payments to provincial
authorities.

We estimate that limestone reserves for all cement plants
currently producing clinker will be adequate to permit
production at present capacities for at least 20 years.
Other raw materials, such as clay, shale, sandstone and gypsum
are either obtained from reserves we own or are purchased from
suppliers and are readily available.

Where is our cement made?

Our U.S. plants are primarily concentrated in the central and
midwestern states, extending from the northern Great Lakes
southward along the Mississippi River system. We are the only
cement producer serving all regions of Canada. At
December 31, 2001, we owned and operated 15 full-production
cement manufacturing plants with a combined rated annual clinker
production capacity of approximately 13.0 million tons
consisting of 7.2 million tons in the U.S. and
5.8 million tons in Canada. We also operated two cement
grinding facilities.

The Canadian Portland Cement Associations Plant
Information Summary report that was prepared as of
December 31, 2000, the most recent date for which
information is available, shows that Lafarge Canadas
capacity is the largest of the cement companies in Canada and
represented approximately 35 percent of the total active
industry clinker production capacity in Canada.

A similar report for the U.S. prepared as of December 31,
2000, shows that our owned and operated cement manufacturing
plants in the U.S. accounted for an estimated 8 percent of
total U.S. active industry clinker production capacity.

The following table indicates the location, types of process and
rated annual clinker production capacity (based on
managements estimates) of each of our operating cement
manufacturing plants at December 31, 2001. The total
clinker production of a cement plant might be less than its
rated capacity due principally to product demand and seasonal
factors. Generally, a plants cement production capacity is
greater than its clinker production capacity.

11



---



##### Table of Contents



Rated Annual Clinker Production Capacity of

Cement Manufacturing Plants


(in short tons)*


|                                                  |  |         |           |          |  |  |           | 
|------------------------------------------------- |  | ------- | --------- | -------- |  |  | --------- | 
|                                                 
|U.S. Plants                                      
|                                                 
|                                                  |  | Clinker
|Location                                          |  | Process |           | Capacity
|                                                  |  |         |           |         
|Paulding, Ohio                                    |  |         | Wet       |          |  |  | 470,700   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Fredonia, Kansas                                  |  |         | Wet       |          |  |  | 411,400   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Whitehall, Pennsylvania                           |  |         | Dry       | ***      |  |  | 785,000   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Alpena, Michigan                                  |  |         | Dry       |          |  |  | 2,354,000 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Davenport, Iowa                                   |  |         | Dry       | **       |  |  | 1,055,600 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Sugar Creek, Missouri                             |  |         | Dry       |          |  |  | 517,500   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Joppa, Illinois                                   |  |         | Dry       | ***      |  |  | 1,172,900 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Seattle, Washington                               |  |         | Wet       |          |  |  | 420,000   | 
|                                                  |  |         |           |          |  |  |           | 
|                                                 
|                                                 
|                                                 
|                                                 
|Total capacity                                    |  |         | 7,187,100 |         
|                                                  |  |         |           |         
|                                                 
|                                                 
|                                                 
|                                                 
|Total 2001 clinker production                     |  |         | 6,731,000 |         
|                                                  |  |         |           |         
|                                                 
|                                                 
|                                                 
|                                                 
|2001 production as a percentage of total capacity |  |         | 94        | %       
|                                                  |  |         |           |         
|Canadian Plants                                   |  |         |           |         
|                                                  |  |         |           |         
|Brookfield, Nova Scotia                           |  |         | Dry       |          |  |  | 516,300   | 
|                                                 
|                                                 
|                                                 
|                                                 
|St-Constant, Québec                               |  |         | Dry       |          |  |  | 1,046,300 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Bath, Ontario                                     |  |         | Dry       | ***      |  |  | 1,085,000 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Woodstock, Ontario                                |  |         | Wet       |          |  |  | 560,200   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Exshaw, Alberta                                   |  |         | Dry       | **       |  |  | 1,279,900 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Kamloops, British Columbia                        |  |         | Dry       |          |  |  | 211,000   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Richmond, British Columbia                        |  |         | Dry       | **       |  |  | 1,102,300 | 
|                                                  |  |         |           |          |  |  |           | 
|                                                 
|                                                 
|                                                 
|                                                 
|Total capacity                                    |  |         | 5,801,000 |         
|                                                  |  |         |           |         
|                                                 
|                                                 
|                                                 
|                                                 
|Total 2001 clinker production                     |  |         | 4,989,000 |         
|                                                  |  |         |           |         
|                                                 
|                                                 
|                                                 
|                                                 
|2001 production as a percentage of total capacity |  |         | 86        | %       
|                                                  |  |         |           |         




|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | One short ton equals 2,000 pounds.                                                                                                                             
|   
|**  | Preheater, pre-calciner plants. The capacity of Exshaws
        preheater, pre-calciner kiln is 65 percent of the
        plants clinker production capacity.
|   
|*** | Preheater plants. The capacity of Joppas preheater kiln is
        55 percent of the plants clinker production capacity.                                     

All of our cement plants are fully equipped with raw grinding
mills, kilns, finish grinding mills, environmental dust
collection systems and storage facilities. We own all of our
cement plants, and the land on which they are located, free of
major encumbrances, except the Exshaw cement plant and the
Kamloops limestone and cinerite quarries.



| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Exshaw plant is built on land leased from the province of
        Alberta. The original lease has been renewed for a 42-year term
        commencing in 1992. Annual payments under the lease are
        presently based on a fixed fee per acre.
|
| |  | The Kamloops plant, as well as the gypsum quarry that serves
        this plant, is located on land we own. The limestone and
        cinerite quarries are located on land leased from the province
        of British Columbia until March 2022.    

The land, quarry, buildings and construction in progress related
to the cement plant that we are building in Sugar Creek,
Missouri are being leased from the City of Sugar Creek, Missouri
pursuant to a Chapter 100 bond financing. The lease expires
in 2020 and contains provisions that automatically transfer
ownership of the leased facilities to Lafarge at the end of the
lease term.

We believe that each of our cement manufacturing plants is in
satisfactory operating condition.

At December 31, 2001, we owned cement grinding plants for
the processing of clinker into cement at Fort Whyte, Manitoba;
Edmonton, Alberta; Montreal East, Quebec; Superior, Wisconsin
and Port Manatee and Tampa, Florida. After being shut down for
several years, the Montreal-East grinding plant was retrofitted
in

12



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##### Table of Contents





The significance of fuel in making
cement

Fuel represents a significant portion of the cost of
manufacturing cement. We place special emphasis on becoming, and
have become, more efficient in our sourcing and use of fuel. In
general, dry process plants consume significantly less fuel per
ton of output than do wet process plants. At December 31,
2001, approximately 82 percent and 90 percent of our
owned clinker production capacity in the U.S. and Canada,
respectively, used the dry process. The Portland Cement
Association estimates that approximately 76 percent of the
U.S. cement industrys clinker capacity and approximately
93 percent of the Canadian industrys capacity
utilizes dry process technology.

As an additional means of reducing energy costs, most of our
cement plants are equipped to convert from one form of fuel to
another with very little interruption in production, thus
avoiding dependence on a single fuel and permitting us to take
advantage of price variations between fuels. Our Exshaw, Alberta
cement plant is not currently equipped to convert from natural
gas fuel, and we consequently suffered from the high gas costs
in 2000 and, to a lesser extent, in 2001. We have begun a fuel
flexibility project at this plant to enable it to convert to
coal, which we expect to complete by mid-2002.

Our use of fuel-quality waste supplied by Systech Environmental
Corporation also has resulted in substantial fuel cost savings.
At December 31, 2001, we used fuel-quality waste materials
obtained and processed by Systech as fuel at two of our U.S.
cement plants. Fuel-quality waste supplied by Systech
constituted approximately 7 percent of the fuel used by us
in all of our cement operations during 2001.

Our two U.S. cement plants that utilize fuel-quality waste are
subject to emission limits and other requirements under the
Federal Resource Conservation and Recovery Act and Boiler and
Industrial Furnaces regulations. See Environmental
Matters  Resource Conservation and Recovery
Act  Boiler and Industrial Furnaces Regulations
in this Item 1 of the Annual Report for further discussion
regarding these regulations.

13



---



##### Table of Contents



The following table shows the possible alternative fuel sources
for our cement manufacturing plants in the U.S. and Canada at
December 31, 2001.

|               |                            |       |                                                       
|-------------- | -------------------------- | ----- | ------------------------------------------------------
|Plant Location |                            | Fuels
|               |                            |      
|U.S.:          |                            |      
|              
|              
|              
|              
|               | Paulding, Ohio             |       | Coal, Coke, Fuel-Quality Waste                        
|              
|              
|              
|              
|               | Fredonia, Kansas           |       | Coal, Fuel-Quality Waste, Natural Gas, Coke           
|              
|              
|              
|              
|               | Whitehall, Pennsylvania    |       | Coal, Oil, Coke, Tire Derived Fuel                    
|              
|              
|              
|              
|               | Alpena, Michigan           |       | Coal, Coke, Natural Gas                               
|              
|              
|              
|              
|               | Davenport, Iowa            |       | Coal, Coke                                            
|              
|              
|              
|              
|               | Sugar Creek, Missouri      |       | Coal, Coke, Natural Gas                               
|              
|              
|              
|              
|               | Joppa, Illinois            |       | Coal, Coke, Natural Gas                               
|              
|              
|              
|              
|               | Seattle, Washington        |       | Natural Gas, Coal, Coke, Waste Oil                    
|              
|              
|              
|              
|Canada:        |                            |      
|              
|              
|              
|              
|               | Brookfield, Nova Scotia    |       | Coal, Oil, Fuel-Quality Waste                         
|              
|              
|              
|              
|               | St-Constant, Quebec        |       | Natural Gas, Oil, Coke, Pitch Fuel, Tire Derived
	Fuel
|              
|              
|              
|              
|               | Bath, Ontario              |       | Natural Gas, Coke, Coal                               
|              
|              
|              
|              
|               | Woodstock, Ontario         |       | Natural Gas, Coal, Coke, Oil                          
|              
|              
|              
|              
|               | Exshaw, Alberta            |       | Natural Gas                                           
|              
|              
|              
|              
|               | Kamloops, British Columbia |       | Natural Gas, Coal, Coke                               
|              
|              
|              
|              
|               | Richmond, British Columbia |       | Natural Gas, Coke, Coal Tailings, Bio Gas             

Who buys our cement?

We sell cement to several thousand unaffiliated customers. Our
primary customers are:



| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | manufacturers of ready-mixed concrete and other concrete products
|
| |  | contractors throughout Canada and in many areas of the U.S.      

The states in which we had the most significant U.S. sales in
2001 were Michigan and Florida. Other states in which we had
significant sales included: Wisconsin, Louisiana, Ohio,
Minnesota, Missouri, Washington, New York, Iowa, Illinois,
Kansas, Pennsylvania, North Dakota, Tennessee and Nebraska.

In Canada, we made our most significant sales of cement in
Ontario and Alberta, which together accounted for approximately
51 percent of our total Canadian cement shipments in 2001.
Other provinces in which we had significant sales included
British Columbia and Quebec. Approximately 20 percent of
our cement shipments in Canada were made to affiliates.

No single unaffiliated customer accounted for more than
10 percent of our consolidated sales during 2001, 2000 or
1999.

How do we distribute products to our
customers?

At December 31, 2001, our U.S. sales offices were located
in Palmetto, Florida; Davenport, Iowa; Lansing, Michigan;
Independence, Missouri; Orchard Park, New York; Valley City,
North Dakota; Maumee, Ohio; Nashville, Tennessee; Seattle,
Washington; Milwaukee, Wisconsin; and Kingwood, Texas.

At December 31, 2001, our Canadian sales offices were
located in Edmonton and Calgary, Alberta; Kamloops and Richmond,
British Columbia; Winnipeg, Manitoba; Richmond Hill, Ontario;
Montreal, Quebec; and Regina and Saskatoon, Saskatchewan.

We maintain distribution and storage facilities at all cement
manufacturing and finishing plants and at approximately 80 other
locations including four deep-water ocean terminals. These
facilities are strategically located to extend the marketing
areas of each plant. Because of freight costs, most cement is
sold within a

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We utilize trucks, rail cars and waterborne vessels to transport
cement from our plants to distribution facilities or directly to
our customers. Transportation equipment is owned, leased or
contracted, as required. In addition, some of our customers in
the U.S. make their own transportation arrangements and take
delivery of cement at our manufacturing plant or distribution
facility.

Each cement plant has facilities for shipping by rail and by
truck. The Richmond, Alpena, Bath, Davenport, Sugar Creek,
Seattle and Joppa plants have facilities for transportation by
water.

How do changes in the seasons and weather
affect our business?

Our cement business is seasonal because construction activity
usually diminishes during the winter. Demand also may be
adversely impacted by unfavorable weather conditions, including
hurricanes, for example. Information with respect to quarterly
financial results is set forth in Notes to Consolidated
Financial Statements  Quarterly Data
(unaudited) in Part II, Item 8, Financial
Statements and Supplementary Data of this Annual Report.

Who are our competitors?

The competitive marketing radius of a typical cement plant for
common types of cement is approximately 250 miles except
for waterborne shipments, which can be economically transported
considerably greater distances. Consequently, even cement
producers with global operations compete on a regional basis in
each market in which that company manufactures and distributes
products. No single cement company in the U.S. has a production
and distribution system extensive enough to serve all U.S.
markets. A companys competitive position in a given market
depends largely on the location and operating costs of its
plants and associated distribution terminals. Vigorous price,
service and quality competition is encountered in each of our
primary marketing areas.

Our operating cement plants located in Canada represent an
estimated 35.0 percent of the rated annual active clinker
production capacity of all Canadian cement plants. We are the
only cement producer serving all regions of Canada. Our largest
competitor in Canada accounted for approximately
17.8 percent of rated annual active clinker production
capacity. Our cement plants operating in the U.S. represented an
estimated eight percent of the rated annual active clinker
production capacity of all U.S. cement plants (13.2 percent
including the Managed Assets). Our three largest competitors in
the U.S. accounted for approximately 12.6 percent,
11.8 percent and 5.8 percent, respectively, of the
rated annual active clinker production capacity. These
statements regarding our ranking and competitive position in the
cement industry are based on the PCAs U.S. and
Canadian Portland Cement Industry: Plant Information
Summary report which was prepared as of December 31,
2000.

Customer Orders

Sales of cement, as stated above, are made on the basis of
competitive prices in each market area, generally pursuant to
telephone orders from customers who purchase quantities
sufficient for their immediate requirements. Our sales of these
products do not typically involve long-term contractual
commitments. The amount of backlog orders, as measured by
written contracts, is normally not significant.

15



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##### Table of Contents



The Gypsum Segment

Who are we?

With the acquisition of two gypsum drywall manufacturing plants
in September 1996, our gypsum group was created. The Buchanan,
New York plant, located 30 miles outside of
New York City, and the Wilmington, Delaware plant
produce a wide-ranging line of gypsum drywall products. On
January 1, 2000, we acquired Atlantic Group Ltd., a
supplier of gypsum drywall in Newfoundland, Canada. In May 2000,
we acquired Cel-Tex, a joint compound manufacturer in Quebec,
Canada.

In June 1999, we began construction of a gypsum drywall plant in
northern Kentucky, just outside of Cincinnati, which began
operations at the end of the second quarter of 2000. We have
also completed construction of a nearly identical drywall plant
in Palatka, Florida, which began operations in January 2001.
These facilities each have the capacity to produce up to
900 million square feet of  1/2-inch drywall a year,
which makes them the largest single production lines in the U.S.
Both plants were built to satisfy 100 percent of their
primary raw material by using recycled materials, including
reclaimed paper and synthetic gypsum. These state-of-the-art
facilities have enabled us to reach a U.S. national market share
level of close to six percent.

We continued to strengthen our market presence in the U.S.
Northeast market in January 2002 with the acquisition of
Continental Gypsum, an independent drywall manufacturer in
Newark, New Jersey. The acquisition which is expected to add
approximately 300 million square feet of  1/2-inch
drywall capacity to our gypsum operations. With Continental
Gypsum, we have significantly strengthened our position in the
New York City area, the single largest metropolitan drywall
market in the world.

We offer a full line of gypsum drywall products for:



| |   |           
| | - | ----------
| |  | Partitions
|
| |  | Paneling  
|
| |  | Linings   
|
| |  | Ceilings  
|
| |  | Floors    

Our products are used for both new residential and commercial
construction and for repair and remodeling.

During 2001, 2000 and 1999, our gypsum operations accounted for
five percent, five percent and six percent,
respectively, of consolidated net sales. In 2001, our gypsum
operations reflected negative gross profit, while in 2000 and
1999 gypsums gross profit represented one percent and
eight percent, respectively, of consolidated amounts.

How is gypsum drywall made?

Gypsum is the common term for calcium sulfate dihydrate. Water
molecules are physically locked inside the crystal structure of
the gypsum molecule.

To make drywall:



| |   |                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | gypsum rock or synthetic gypsum is fed into a dryer, where
	surface moisture is removed;                                                                                                                                                                                                                      
|
| |  | then the material is ground to a flour-like consistency known as
	land plaster;                                                                                                                                                                                                                               
|
| |  | the land plaster is then calcined, or heated, into calcium
	sulfate hemihydrate, also known as stucco. (Gypsum is unique
	because it is the only mineral that can be calcined, and yet go
	back to its original state when rehydrated. It is this property
	which is exploited in the manufacturing process.);
|
| |  | the stucco is blended with water and other ingredients in a
	mixer to form a slurry;                                                                                                                                                                                                                          

16



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| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | this slurry is extruded between two continuous sheets of paper
	at the forming station;                                      
|
| |  | the product travels down a long line in order to give the stucco
	molecules time to rehydrate and recrystallize into gypsum; 
|
| |  | as it travels, the gypsum crystals grow into each other and into
	the liner paper, giving the product 3-dimensional strength;
|
| |  | when the product has achieved initial set or
	firmness (approximately 3 minutes), the product is cut into
	lengths;        
|
| |  | the individual boards are then dried in a kiln to remove excess
	water; and                                                  
|
| |  | the boards are packaged face to face and stored until ready for
	shipment.                                                   

Where do we make our gypsum drywall?

With the addition of the Continental Gypsum plant in January
2002, we now own six gypsum drywall manufacturing plants with a
combined rated annual production capacity approaching three
billion square feet of  1/2-inch drywall.

The rated annual capacity assumes around-the-clock production
of  1/2-inch drywall 365 days a year (8,760 annual
hours of operation). The capacity utilization table below
excludes the Continental plant, which was acquired in January
2002, and references practical capacity, which assumes 8,400
production hours per year, efficiency ratios, which are set at
the top of the industry standards, and our actual product mix.

|                           |                                                        |           |     |       |  
|-------------------------- | ------------------------------------------------------ | --------- | --- | ----- | -
|                           |                                                        | Practical
|Location                   |                                                        | Capacity*
|                           |                                                        |          
|Buchanan, New York         |                                                        |           | 342 |      
|                          
|                          
|                          
|                          
|Palatka, Florida           |                                                        |           | 845 |      
|                          
|                          
|                          
|                          
|Silver Grove, Kentucky     |                                                        |           | 747 |      
|                          
|                          
|                          
|                          
|Wilmington, Delaware       |                                                        |           | 399 |      
|                          
|                          
|                          
|                          
|Corner Brook, Newfoundland |                                                        |           | 119 |      
|                           |                                                        |           |     |      
|                           | Total practical capacity                               |           |     | 2,452 |  
|                           |                                                        |           |     |      
|                           | Total 2001 drywall production                          |           |     | 1,597 |  
|                           |                                                        |           |     |      
|                           | 2001 production as a percentage of practical
	capacity |           |     | 65    | %
|                           |                                                        |           |     |      



---



|  |                        
|- | -----------------------
|* | In billion square feet.

All of the plants are fueled primarily by natural gas. Natural
gas is purchased on a contract basis with transportation
negotiated under long-term contracts. The Wilmington facility is
located on leased property at the Port of Wilmington. The gypsum
manufacturing facility of Continental Gypsum, which we acquired
in January 2002, is leased under an agreement that expires in
2031. All other facilities are located on property we own. We
believe that each of our manufacturing plants is in satisfactory
operating condition.

Where do we get the raw materials to make
our drywall?

Currently, we have a 10-year requirements contract with an
unaffiliated third party for gypsum rock used in the production
of gypsum drywall at the Buchanan and Wilmington plants. This
contract terminates in September 2006. The Corner Brook plant
obtains its gypsum from a quarry that we own. The Silver Grove
and Palatka plants use synthetic gypsum instead of natural rock,
which is chemically equivalent to naturally formed gypsum and is
a recycled by-product of coal combustion. We have entered into
supply agreements at these plants for the procurement of
synthetic gypsum, which call for minimum annual purchases over a
20-year period ending in 2020. The Continental Gypsum plant that
we acquired early in 2002 obtains gypsum rock from an
unaffiliated third party through a supply agreement that expires
in March 2003. After March

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In late 2001, our paperboard liner joint venture with Rock-Tenn
Company in Lynchburg, Virginia, Seven Hills, LLC, began to
produce a portion of our paper requirements, which is expected
to reduce our material costs in 2002.

Who buys our drywall?

Our gypsum drywall products are sold to a variety of:



| |   |                                                      
| | - | -----------------------------------------------------
| |  | residential and commercial building materials dealers
|
| |  | individual and regional/national gypsum distributors 
|
| |  | original equipment manufacturers                     
|
| |  | building materials distribution companies            
|
| |  | lumber yards and do-it-yourself home centers       

The Silver Grove plants principal market is centered
around Kentucky and adjoining states in the mid-west. In
addition, Silver Grove has the ability to reach markets in the
southeast, Florida and southwest by rail. The Buchanan
plants principal markets include New York, Pennsylvania
and New Jersey. The Wilmington plants largest markets are
Pennsylvania and North Carolina, followed closely by Maryland
and Virginia. The Corner Brook drywall plants principal
markets include the eastern provinces of Canada. Sales are made
on the basis of competitive prices in each market area,
generally pursuant to telephone orders from customers who
purchase quantities sufficient for their requirements. Customer
orders are taken at a centralized customer service facility.

How do we distribute products to our
customers?

We utilize contracted trucks to transport finished gypsum board
to distributors and other customers. Additionally, the
Wilmington and Silver Grove plants are equipped to ship by rail.
The Buchanan plant is in close proximity to its key markets
resulting in an average shipping distance of 120 miles of
the plant. The Wilmington plants average shipping distance
is just under 200 miles. The Corner Brook plant ships over
25 percent of its production on the island of Newfoundland.
Distribution of drywall produced at our Silver Grove and Palatka
plants is more widely spread than the northeast plants. In 2001,
the shipping distances for the Silver Grove and Palatka plants
averaged approximately 300 miles and 250 miles,
respectively.

How do changes in the seasons and in the
weather affect our business?

Our gypsum drywall business is seasonal because construction
activity usually diminishes during the winter. Demand also may
be adversely impacted by unfavorable weather conditions,
including hurricanes, for example. Information with respect to
quarterly financial results is set forth in Notes to
Consolidated Financial Statements  Quarterly Data
(unaudited) in Part II, Item 8, Financial
Statements and Supplementary Data of this Annual Report.

Who are our competitors?

The gypsum industry is a large integrated industry in which a
few large companies predominate. These companies operate gypsum
drywall plants and usually own the gypsum reserves used in
manufacturing the drywall. They also sell gypsum for use in
Portland cement production, agriculture and other manufactured
gypsum products.

The gypsum drywall industry is highly competitive. Drywall
producers primarily compete on a regional basis. Producers whose
customers are located close to their drywall plants benefit from
lower transportation costs. We enjoy this competitive advantage
with respect to drywall produced at our Buchanan and Wilmington

18



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##### Table of Contents





Gypsum drywall is regarded as a commodity product. We intend to
compete with other producers based on price, product quality and
customer service.

Customer Orders

Sales of gypsum drywall products are made on the basis of
competitive prices in each market area, generally pursuant to
telephone orders from customers.

Trademarks and Patents

As of December 31, 2001, Lafarge owns, has the right to use
or has pending applications for approximately 30 patents granted
by the U.S. and Canada and 127 trademarks related to
construction materials, cement and cement-related products, and
gypsum and our trademarked, high performance concrete, cement
and gypsum products for commercial, agricultural, industrial and
public works construction. For example, trademarked precast
concrete products such as SPLITROCK retaining wall modules
and paving stones are commonly used in municipal, commercial and
residential landscaping designs. In addition, our trademarked
concrete mix designs, including Agilia®, Futurecrete®,
Agrifarge® and WeatherMix®, provide customers with
enhanced performance for specific applications. Specialty
cements and cementitious products like Lafarges
trademarked Tercem 3000, Maxcem, Supercem® and
SF® cement are designed for durable applications such as
bridges, underwater structures, skyscrapers and industrial
floors. Further, during the year, we entered into a licensing
agreement to market Ductal®, a breakthrough composite
building material, in the U.S. and Canada. We believe that our
rights under existing trademarks are of value to our operations,
but no one trademark or group of trademarks is material to the
conduct of our business as a whole.

Research, Development and Engineering

We conduct research and development activities for the cement
and cement-related products segments products at our
laboratory located in Montreal, Canada, which we believe is one
of the largest private laboratories in the North American cement
industry. In addition, the Lafarge Group shares its new product
developments and enhancements for the construction industry with
the construction materials and the cement and cement-related
products segments and we have access to their state-of-the-art
research and development resources.

We are party to three agreements with Lafarge S.A. concerning
the sharing of costs for research and development, strategic
planning and marketing. In addition, we are involved in research
and development through our participation in the Portland Cement
Association. Our subsidiary, Systech, is engaged in research and
development in an effort to further develop technology to handle
additional waste materials. Research and development costs,
which are charged to expense as incurred, were
$7.2 million, $7.2 million and $7.5 million for
2001, 2000 and 1999, respectively. This includes amounts we
accrued for technical services rendered by Lafarge S.A., under
the terms of the agreements discussed above, of
$5.8 million, $6.1 million and $7.0 million
during 2001, 2000 and 1999, respectively.

Who Are Our Employees?

As of December 31, 2001, we employed approximately 15,600
individuals of which approximately 10,400 were hourly employees.
Of these hourly employees, approximately 8,000 were employed by
construction materials, 2,000 by cement and cement-related
products, and 260 by gypsum. Salaried employees totaled
approximately 5,200. These employees generally act in
administrative, managerial, marketing, professional and
technical capacities. Overall, we consider our relations with
our employees to be satisfactory.

19



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##### Table of Contents



Construction Materials

 U.S. Construction Materials Operations

Our approximately 5,600 U.S. construction materials employees
consist of approximately 4,400 hourly employees and 1,200
salaried employees.

In the U.S., our hourly workforce is covered by 43 collective
bargaining agreements with 13 major labor unions. During 2001,
13 collective bargaining and benefit agreements were
successfully negotiated with union bargaining groups without a
work stoppage. In 2002, 12 labor and benefit agreements will
expire. All of these agreements are expected to be successfully
negotiated without a work stoppage.

 Canadian Construction Materials Operations

Our employees in the Canadian construction materials operations
totaled approximately 5,300 at the end of 2001, with
approximately 3,600 hourly employees and 1,700 salaried
employees.

In eastern Canada, hourly employees are covered by some 115
collective bargaining agreements with a number of unions. There
are 50 non-union business units in which discussions are held
directly with employees. During 2001, some 30 collective
bargaining agreements became due. Two collective agreement
renewals resulted in legal strike action by the employees. One
dispute lasted two months and the other two weeks. Two first
agreements were successfully negotiated following successful
certifications from the previous year. Some 35 collective
bargaining agreements will expire throughout eastern Canada in
2002. We do not anticipate any major disruptions as a result of
work stoppages during 2002.

In western Canada, there are 54 collective labor agreements with
several different unions, which include 10 agreements through
employer associations. During 2001, 21 collective labor
agreements were successfully negotiated. We continue to
negotiate 3 collective agreements that have expired, with no
work stoppages anticipated. During 2002, a further 17 collective
labor agreements will expire. These agreements are expected to
be renewed without work stoppage.

Cement and Cement-Related Products

 U.S. Cement and Cement-Related Products Operations

The majority of our 1,650 U.S. hourly employees are represented
by labor unions. During 2001, labor agreements were negotiated
at the Fredonia, Kansas; Tampa, Florida; Whitehall,
Pennsylvania; and Davenport, Iowa cement plants. Also, terminal
negotiations were concluded for the Saginaw and Detroit,
Michigan terminals. During 2002, the labor agreements will
expire at the Seattle, Washington cement plant and Waukegan,
Illinois and Cleveland, Ohio distribution terminals. We expect
the agreements to be successfully concluded without work
stoppages.

 Canadian Cement and Cement-Related Products
Operations

Substantially all of our approximately 350 Canadian hourly
employees are covered by labor agreements. In 2001, the
Montreal-East terminal collective agreement was renewed for
5 years without a work stoppage. The Exshaw, Alberta cement
plant collective agreement is currently being negotiated. The
Bath, Ontario plant collective agreement expired in November
2001 and employees previously covered under the agreement have
been on strike since December 5, 2001; however, the plant
is still in operation and is expected to continue to operate
throughout the year. In 2002, contracts at the Brookfield, Nova
Scotia and the St-Constant, Quebec plants, and the Toronto,
Ontario and Winnipeg, Manitoba terminals are up for renewal.

Gypsum

 U.S. Gypsum Drywall Operations

Less than half of gypsums approximately 170 U.S. hourly
employees are covered by labor agreements. Discussions are held
directly with employees at our Silver Grove, Kentucky and
Palatka, Florida facilities, both of which have non-union
workforces. An extensive training and integration program,
initiated during the

20



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##### Table of Contents





There are three local labor agreements in place with two unions
at our Buchanan, New York and Wilmington, Delaware plants. The
Buchanan, New York plant is in the second year of a three-year
agreement, which expires in November 2003. In 2001, a new
three-year agreement was negotiated with the union at the
Wilmington, Delaware plant without any work stoppages.

 Canadian Gypsum Drywall Operations

All of the approximately 90 hourly employees at our Corner
Brook, Newfoundland drywall manufacturing facility are covered
by a labor agreement, which is in the third year of a five year
contract that expires in 2003. There is no recent history of
labor disputes at the Corner Brook plant. There are 20 non-union
hourly employees at the Chambly, Quebec joint treatment
manufacturing plant where discussions are held directly with
employees and relations with employees are very good.

Environmental Matters

The following discusses the environmental laws and their
application to Lafarge, and sets forth the proposed changes to
or new environmental laws or regulations that could affect us.

Our operations, like those of other companies engaged in similar
businesses, involve the use, release, discharge, disposal and
clean up of substances regulated under increasingly stringent
federal, state, provincial and/or local environmental protection
laws. Many of the regulations are technically and legally
complex, posing significant compliance challenges. Our
environmental program includes an environmental policy and an
environmental ethics policy that are designed to provide
corporate direction for all operations and employees, an
environmental audit and follow-up program, routine compliance
oversight of our facilities, environmental guidance on key
issues confronting us, legislative and regulatory advocacy on
key environmental issues that might impact us, an environmental
organization including routine training, best practices in
environmental management, an exchange of information by
environmental professionals, an environmental recognition award
program, routine and emergency reporting systems and
environmental reports, development and implementation of an
environmental management system in our cement operations, and a
voluntary environmental partnership with the World Wildlife Fund
that commits the Lafarge Group to a biodiversity program,
establishing and tracking key environmental indicators to
measure continued environmental improvement, and implementing a
voluntary CO2 reduction commitment.

The current environmental laws affecting us are summarized below
and our policies regarding environmental expenditures are
discussed in Other Factors Affecting the
Company  Environmental Matters in
Managements Discussion and Analysis of Financial Condition
and Results of Operations set forth under Part II,
Item 7 of this Annual Report, which is incorporated herein
by reference. For the years ended December 31, 2001, 2000
and 1999, total capital expenditures and remediation expenses
incurred for environmental matters are not material to the
financial position, results of operations or liquidity of
Lafarge. Further, during the year ended December 31, 2001,
no enforcement matters were initiated or resolved or are
outstanding that have a material effect on our financial
statements. However, our expenditures for environmental matters
have increased and are likely to increase in the future. Because
of different requirements in the environmental laws of the U.S.
and Canada, the complexity and uncertainty of existing and
future requirements of environmental laws, permit conditions,
costs of new and existing technology, potential preventive and
remedial costs, insurance coverages and enforcement related
activities and costs, we cannot determine at this time whether
capital expenditures and other remedial actions that we may be
required to undertake in the future will materially affect our
financial position, results of operations or liquidity. With
respect to known environmental contingencies, we have recorded
provisions for estimated probable liabilities and do not believe
that the ultimate resolution of such matters will have a
material adverse effect on our financial condition, results of
operations or liquidity.

Some of the proposed changes to, or new environmental laws or
regulations that could affect us, are discussed below.

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Resource Conservation and Recovery
Act  Boiler and Industrial Furnaces Regulations

We currently operate two U.S. cement plants using fuel-quality
wastes that are subject to emission limits and other
requirements under the federal Resource Conservation and
Recovery Act (RCRA) and Boiler and Industrial
Furnaces (BIF) regulations (Paulding, Ohio and
Fredonia, Kansas). The other BIF requirements include a
permitting process, extensive record keeping of operational
parameters and raw materials and waste-derived fuels use,
demonstration of financial capability to cover future closures
and spill cleanups, and corrective action requirements for other
solid waste management units at the facilities. Our two BIF
cement plants submitted, in a timely manner, formal Part B
permit applications. The Fredonia and Paulding plants
final Part B permits became effective on January 18,
2000 and August 5, 2000, respectively. On October 22,
1998, we announced that our Alpena plant would cease using
fuel-quality wastes no later than June 1, 2001. The Alpena
plant is no longer burning waste derived fuels and is in the
process of closing its waste-derived fuels operations and
implementing any corrective actions required by applicable
governmental agencies.

The U.S. Environmental Protection Agency (EPA)
proposed revisions of the BIF regulations in May 1996, citing
both RCRA and Clean Air Act authority. The proposal relied
heavily on maximum achievable control technology
(MACT) requirements of Title III of the Clean Air
Act Amendments of 1990 with certain elements of the risk-based
authority of RCRA incorporated into the proposal. The proposed
standards were based on technologies from a pool of
the top 12 environmental performers of existing facilities that
use fuel-quality waste as a supplemental fuel. Our Alpena plant,
which was using waste derived fuels at the time, was a MACT pool
facility; it uses a baghouse as its primary air pollution
control device. In 1998, the Paulding plant installed a baghouse
and a bypass system that should enable it to meet the final
standards. We have actively participated in the regulatory
process to help formulate revised BIF standards that are
reasonable, cost-effective and comply with the RCRA and the
Clean Air Act. The EPA subsequently reopened the rulemaking
process on several occasions to solicit public comment on new
data and proposed regulatory approaches (i.e., new limits
for semi-volatile metals and a particulate matter continuous
emission monitoring system). A final regulation was published on
September 30, 1999. Existing BIF facilities had up to three
years to meet the new standards or cease using hazardous waste
as a supplemental fuel. In late 1999, we petitioned the U.S.
Court of Appeals for the District of Columbia Circuit to review
certain aspects of the EPA final rule. Several other industries
and other organizations also have sought judicial review of the
final rule. On July 24, 2001, the U.S. Court of Appeals for
the District of Columbia Circuit vacated the rule rejecting the
EPA basis for the final rules with clear direction to repropose
and finalize the BIF regulations within five years using a
different criteria for MACT. The parties subsequently agreed
that during the interim period the existing BIF rules will
remain in place. In light of the Part B permits we have in place
and the technology we employ, we are confident that our two
plants will meet the interim BIF requirements.

Resource Conservation and Recovery
Act  Cement Kiln Dust

Cement kiln dust (CKD) is a by-product of many of
our cement manufacturing plants. CKD has been excluded from
regulation as a hazardous waste under the so-called Bevill
amendment to the RCRA until the EPA completes a study of CKD,
determines whether it should be regulated as a hazardous waste
and issues appropriate implementing regulations. In January
1995, the EPA issued a regulatory determination in which it
found that certain CKD management practices create unacceptable
risks that require additional regulation. The EPA specifically
identified the potential for groundwater contamination from CKD
management in karst terrain, fugitive emissions from CKD
handling and management and surface water/storm water runoff
from CKD management areas. In March 1995, we joined other cement
manufacturers in submitting to the EPA a proposed enforceable
agreement for managing CKD that included specific CKD management
standards. After a lengthy legal review, the EPA decided that it
lacks the legal authority to enter into an enforceable
agreement. In 1996, the EPA announced that it was recommencing
the process of developing CKD management standards using the
industry standards as the technical starting point and
Subtitle C of RCRA as its legal authority. At that time, we
indicated to the EPA that we believed it inappropriate for the
EPA to develop CKD standards under Subtitle C of RCRA. Over
the last few years, Lafarge and other cement manufacturers,
through our trade association, have worked with the EPA and
various states to develop a

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In order to mitigate the anticipated future costs of CKD
regulation at the federal, provincial and/ or state levels, we
have had a program in place to assess our management practices
for CKD at operational and inactive facilities in both the U.S.
and Canada, and to voluntarily take remedial steps and institute
best management practices consistent with the industry practices
for CKD management. As part of this program, we also assess and
modify our process operations, evaluate and use alternative raw
materials, and implement new technologies to reduce the
generation of CKD.

Historical waste disposal and/or
contaminated sites

As with many industrial companies in the U.S. and Canada, we
have been involved in certain remedial actions to clean up or to
close certain historical waste disposal and/ or contaminated
sites, as required by federal, provincial and/or state laws. In
addition, we have voluntarily initiated cleanup activities at
certain of our properties in order to mitigate long-term
liability exposure and/ or to facilitate the sale of such
property. We routinely review all of our active properties, as
well as our idle properties, to determine whether remediation is
required, the adequacy of accruals for such remediation and the
status of all remedial activities. It has been our experience
that, over time, sites are added to and removed from the
remediation list as cleanup actions are finalized and, where
necessary, governmental sign-off is obtained or when it is
determined that no governmental action will be initiated.

Federal environmental laws that impose liability for remediation
include the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, which together are
referred to as Superfund, and the corrective action
provisions of the Resource Conservation and Recovery Act of 1976
(RCRA). Currently, we are involved in one Superfund
remediation. At this site, which the EPA has listed on the
National Priority List, some of the potentially responsible
parties (PRPs) named by the EPA have initiated a
third-party action against 47 other parties, including us. We
have also been named a PRP at this site. The suit alleges that
in 1969 a predecessor of Lafarge sold equipment containing
hazardous substances that may now be present at the site. It
appears that the largest disposer of hazardous substances at
this site is the U.S. Department of Defense. We understand that
the Department of Defense has accepted a substantial share of
responsibility for the sites remediation and is pursuing a
remediation plan with EPA. The suit has been dormant for some
seven years. We believe that this matter is not material to our
financial condition, results of operations or liquidity.

In 1999, the EPA delisted a site where we were a PRP and
remedial activities had been completed. In December 1999, an
action was filed against us and five others to recover response
activity costs incurred by the State of Michigan in responding
to alleged releases of hazardous substances from air-scrubber
baghouse bags at a site in Michigan. All six defendants in the
state action, including Lafarge North America Inc., have settled
with the State of Michigan. The settlement does not materially
impact us.

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Clean Air Act

The Clean Air Act Amendments of 1990 require the EPA to develop
air toxics regulations for a broad spectrum of industrial
sectors, including Portland cement manufacturing. The new MACT
standards are supposed to require plants to install the best
feasible control equipment for certain hazardous air pollutants,
thereby significantly reducing air emissions. We have actively
participated with other cement manufacturers in working with the
EPA to define test protocols, better define the scope of the
MACT standards, determine the existence and feasibility of
various technologies, and develop realistic emission limitations
and continuous emissions monitoring/reporting requirements for
the cement industry. The EPA proposed standards for existing and
new facilities were subject to review and public comment in
1998. On June 14, 1999, the EPA promulgated final MACT
regulations, and existing facilities will have three years to
meet the standards or close down operations. In certain
conditions, a one year compliance extension is applicable if
filed in a timely manner. In September 1999, the cement industry
trade association filed a petition with the U.S. Court of
Appeals for the District of Columbia Circuit challenging certain
aspects of the final rules. The industry negotiated a settlement
with the EPA that resolved as many of the issues as possible,
thereby precluding the need to litigate these matters. On
December 15, 2000, the U.S. Court of Appeals for the D.C.
Circuit remanded certain issues to the EPA for further
consideration (i.e., the need for HCl, mercury and total
hydrocarbons standards for new and existing cement plants). The
Court upheld all other elements of the MACT rule. Our Sugar
Creek, Missouri cement plant that is being modernized and
expanded will have to meet the new MACT standards at the time of
start-up. Several of our other U.S. plants have upgraded and/or
replaced existing emissions controls and emissions monitoring
equipment to be able to comply with the MACT regulations.
Although the costs of such new equipment may be significant, the
actual plant specific costs will vary depending on the level of
existing controls and/or emissions monitoring equipment and
whether or not it could be modified or new equipment had to be
acquired to meet the final MACT standards. In a limited number
of situations, we applied in a timely manner for a compliance
extension. We have assessed all of our U.S. cement plants that
are subject to the new MACT requirements to determine what
actions and schedules were needed to assure compliance with the
new MACT requirements and have identified and incorporated the
specific costs associated with these actions in our operating
and capital budgets. We do not anticipate that costs associated
with complying with the new MACT standards will have a material
impact on our financial statements.

Title V of the 1990 Clean Air Act Amendments has the
potential to impose significant capital expenditures and
operational expenses for various Lafarge manufacturing
operations. The Clean Air Act Amendments established a new
federal operating permit and fee program for many manufacturing
operations. Under the Act, our U.S. operations deemed to be
major sources of air pollution were required to
submit detailed permit applications and pay recurring permit
fees. Our major sources have been routinely paying
permit fees for several years. The permitting requirements
primarily affect our cement manufacturing, gypsum drywall and
waste-fuel operations. We have submitted in a timely manner all
applicable permit applications. Over the past few years, we have
been reviewing draft Title V permits for several of our
facilities. We anticipate that it will be several more years
before all the initial Title V permits are drafted and issued.

In July 1997, the EPA promulgated revisions to two National
Ambient Air Quality Standards (NAAQS) under the
Clean Air Act  particulate matter and photochemical
oxidants (ozone). Because of the nature of our operations, the
proposed addition of a particulate matter standard that would
regulate particles 2.5 microns or less in diameter, and the
regulation of nitrogen oxides emissions as the precursor
pollutant to ozone, is of potential concern. Implementation of
these new standards would not immediately have an impact on
industrial operations. The first step is a several-year data
collection and analysis activity by the states to determine
whether or not the state will be able to meet the new standards.
If a state were unable to demonstrate that it could meet the
standards, it would then be required to modify its state air
quality implementation plan to describe actions to meet the new
standards. This initial phase would take several additional
years to complete. It is presently unknown whether states in
which we operate would be able to meet the new standards, how
the states would modify their implementation plans to
demonstrate compliance and/or the ultimate technology and the
cost impact on our operations. In 1998, the U.S. Congress
clarified the time schedule for implementation of the
particulate matter 2.5 program. Congress prohibited the EPA
from

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In 1998, the EPA also clarified its expectations of states in
the ozone transport region (22 states east of the Mississippi
River plus Missouri) in revising their NOx control
strategies and standards to demonstrate future attainment of the
ozone ambient air quality standards. After the U.S. Court
of Appeals for the District of Columbia Circuits decision
on revisions of the ozone and new particulate matter 2.5
standards, the EPA reinstated the 8-hour ozone standard. The EPA
indicated that the NOx State Implementation Program
(SIP) revision call would now be required to address
attainment of the 8-hour ozone standard in the 22 eastern
states. This regulatory determination was challenged by numerous
industry petitioners. On March 3, 2000, the U.S. Court
of Appeals for the District of Columbia Circuit upheld the
EPAs NOx SIP-revision determination. As a
result, the subject states must commence the NOx SIP
revision process and submit new NOx state
implementation plans and regulations to the EPA by a future date
to be specified by the EPA. The court determination excluded
Wisconsin, and parts of Missouri and Georgia originally covered
by the NOx SIP revision call. The EPA is generally
recommending to the states that they only require
30 percent reduction of NOx from cement plants.
The EPA recommendation allows cement plants to consider all
NOx reductions that have occurred from a 1995
baseline. We do not believe that the costs associated with
revised state NOx regulations will have a material
impact on us.

Global Climate Change

An issue of significance to Lafarge in the U.S. and Canada is
global climate change, or CO2
stabilization/reduction. In December 1997, the United Nations
held an international convention in Kyoto, Japan to take further
international action to ensure CO2 stabilization and/
or reduction after the turn of the century. The international
conference agreed to a protocol to the United Nations Framework
Convention on Climate Change originally adopted in May 1992. The
Kyoto Protocol establishes quantified emission reduction
commitments for certain developed countries, including the U.S.
and Canada, and certain countries that are undergoing the
process of transition to a market economy. These reductions are
to be obtained by 2008-2012. The Protocol was available for
signature by member countries starting in the spring of 1998.
Even though President Clinton signed the Kyoto Protocol in
November 1998, it will require Senate ratification and enactment
of implementing legislation before it becomes effective in the
U.S. In 2001, President Bush indicated that the U.S. would not
be a party to the Kyoto Protocol. In Canada, the government is
proceeding to move ahead with implementation of the Protocols
recently modified in Marrakesh, Morrocco. The consequences of
CO2 reduction measures for cement producers are
potentially significant because CO2 is generated from
combustion of fuels such as coal and coke in order to generate
the high temperatures necessary to manufacture clinker (which is
then ground with gypsum to make cement). In addition,
CO2 is generated in the calcining of limestone to
make clinker. Any imposition of raw material or production
limitations, or fuel-use or carbon taxes, could have a
significant impact on the cement manufacturing industry. In the
past, the Canadian cement industry, including Lafarge, has
entered into a voluntary commitment with the Canadian government
to annually improve energy efficiency by approximately
1 percent per ton of clinker from 1990 to 2005, which
commitment we have been able to meet. The Canadian Cement
industry, including Lafarge, continues to discuss with the
Canadian Government what commitments, if any, are feasible for
the cement industry. In the U.S. in 1996, we joined the
EPAs Climate Wise program, now known as Energy Star
program. This voluntary program promotes energy efficiency in
industrial operations and reduces or stabilizes the
CO2 emissions that result from the generation of
electricity.

In 2000, the Lafarge Group entered into a voluntary
environmental partnership with the World Wildlife Federation
(WWF). One element of the partnership is the
development of a voluntary CO2 reduction program. On
November 6, 2001, the Lafarge Group, in conjunction with
the WWF, announced a voluntary

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2


The Conference of the Parties has continued to work on issues
not clearly resolved in the Kyoto Protocol. The primary focus
was on developing more details on enforcement mechanisms, and
the flexible market mechanisms provisions (i.e.,
country-to-country emissions trading, joint implementation and a
clean development mechanism). These provisions are potentially
important to us as an option for meeting potential
CO2 reductions other than by reducing production,
should the U.S. and Canada eventually ratify the Kyoto Protocol,
and the Protocol comes into force and effect. The most recent
meeting of the Conference of Parties in Marrakesh, Morocco
resolved most of these and other matters. It will not be
possible to determine the impact on us until international, U.S.
and Canadian governmental implementing laws and regulations are
clearly defined and we can determine whether emission offsets or
credits are obtainable and whether alternative cementitious
products can be substituted. The impact in the U.S. will not
occur in the near term because of President Bushs decision
to withdraw from the Kyoto Protocol process.




Executive Officers of the Company

The following sets forth the name, age and business experience
for the last five years of each of our executive officers and
indicates all positions and offices with Lafarge held by them.

|                       |  |                                                                      |  |     |    | 
|---------------------- |  | -------------------------------------------------------------------- |  | --- | -- | 
|Name                   |  | Position                                                             |  | Age
|                       |  |                                                                      |  |    
|Bertrand P. Collomb    |  | Chairman of the Board                                                |  |     | 59 | 
|                      
|                      
|                      
|                      
|Bernard L. Kasriel     |  | Vice Chairman of the Board                                           |  |     | 55 | 
|                      
|                      
|                      
|                      
|Philippe R. Rollier    |  | President and Chief Executive Officer                                |  |     | 59 | 
|                      
|                      
|                      
|                      
|Edward T. Balfe        |  | Executive Vice President and
	President  Construction Materials     |  |     | 60 | 
|                      
|                      
|                      
|                      
|Jean-Marc Lechêne      |  | Executive Vice President and
	President  Cement  North America     |  |     | 43 | 
|                      
|                      
|                      
|                      
|Larry J. Waisanen      |  | Executive Vice President and Chief Financial
	Officer                |  |     | 51 | 
|                      
|                      
|                      
|                      
|Alain Bouruet-Aubertot |  | Senior Vice President and President 
	Lafarge Gypsum                |  |     | 45 | 
|                      
|                      
|                      
|                      
|Todd W. Cunningham     |  | Senior Vice President  Strategy and
	Development                    |  |     | 39 | 
|                      
|                      
|                      
|                      
|L. Philip McClendon    |  | Senior Vice President  General Counsel
	and Secretary               |  |     | 59 | 
|                      
|                      
|                      
|                      
|James J. Nealis III    |  | Senior Vice President  Human Resources                              |  |     | 54 | 
|                      
|                      
|                      
|                      
|Eric C. Olsen          |  | Senior Vice President  Purchasing and
	President  Northeast Region |  |     | 38 | 
|                      
|                      
|                      
|                      
|Yvon BrindAmour       |  | Vice President and Controller                                        |  |     | 44 | 
|                      
|                      
|                      
|                      
|David W. Carroll       |  | Vice President  Environment and
	Government Affairs                 |  |     | 54 | 
|                      
|                      
|                      
|                      
|Kevin C. Grant         |  | Vice President and Treasurer                                         |  |     | 46 | 

Bertrand P. Collomb was appointed to his current position in
January 1989. He has also served as Chairman of the Board and
Chief Executive Officer of Lafarge S.A. since August 1989.
From January 1989 to August 1989 he was Vice Chairman of the
Board and Chief Operating Officer of Lafarge S.A., and from 1987
until January 1989 he was Senior Executive Vice President of
Lafarge S.A. He served as Vice Chairman of the Board and
Chief Executive Officer of Lafarge from February 1987 to January
1989.

Bernard L. Kasriel was appointed to his current position in May
1996. He has also served as Vice Chairman and Chief Operating
Officer of Lafarge S.A. since January 1995. Prior to that
he served as

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Philippe R. Rollier was appointed to his current position
effective May 2001. He served as Regional President of
Lafarge S.A.  Central Europe and CIS for Cement,
Aggregates and Concrete, from 1995 to 2001, and as Group
Executive Vice President of Lafarge S.A. from 1999 to 2001.

Edward T. Balfe was appointed to his current position in July
1994. Prior to that he served as Senior Vice President of
Construction Materials. He served as President of our
Construction Materials Eastern Region and President and General
Manager of Permanent Lafarge, a construction materials affiliate
of Lafarge, from 1990 to 1993.

Jean-Marc Lechêne was appointed to his current position in
January 2002. He previously served as Senior Vice President and
President  Canadian Cement Operations from September
1999 to December 2001 and as Executive Vice President of Lafarge
China from March 1996 to September 2000. Prior to that he served
as Senior Vice President Cement Strategy of Lafarge S.A.
from November 1995 to March 1996.

Larry J. Waisanen was appointed to his current position
effective February 1998. He previously served as Senior Vice
President and Chief Financial Officer of Lafarge from January
1996 to February 1998. He served as Assistant General Manager of
Lafarge S.A.s interests in Turkey from May 1992 to
December 1995. Prior to that he served as Vice President
Controller of Lafarge S.A. from March 1989 to April 1992.

Alain Bouruet-Aubertot was appointed to his current position
effective September 1996. He served as Senior Vice President of
Strategy & Development for Lafarge Platres, a division
of Lafarge S.A., from December 1994 to September 1996.
Prior to that, he was Project Director & Business Manager
for Rhone-Poulenc Chemicals from November 1993 to November 1994
and Technical/ Manufacturing Director for Rhone-Poulenc,
Thann & Mulhouse from January 1992 to October 1993.

Todd W. Cunningham was appointed to his current position
effective March 2002. Prior to that he served as Managing
Director  Mergers and Acquisitions for Marriott
International, Inc. from October 1998 to December 2001 and
Director of Financing for US Airways Group, Inc. from April 1996
to September 1998.

L. Philip McClendon was appointed to his current position
in January 2002. Prior to that he served as Vice President,
General Counsel and Secretary of Blue Circle North America from
1992 through 2001. Mr. McClendon began his career with
Georgia-Pacific Corporation in 1974, where he served as Resident
Counsel until 1980, as Group Counsel until 1981, as Associate
General Counsel  Litigation until 1983 and as
Associate General Counsel  Distribution Division
until 1992.

James J. Nealis III was appointed to his current position
effective January 2000. From August 1996 to December 1998 he
served as Vice President  International Human
Resources for the Lafarge Group in Paris. From January 1994 to
August 1996 he served as Vice President  Human
Resources, Cement Group.

Eric C. Olsen was appointed to his current position in January
2002. He served as Senior Vice President  Strategy
and Development from August 1999 to December 2001. Prior to
that, from May 1993 to August 2000, he was a Partner with
Trinity Associates, a management consulting firm focusing on
capital intensive industries.

Yvon BrindAmour was appointed to his current position in
January 2002. From July 1999 to January 2002 he served as Vice
President and Controller  Canadian Cement Operations.
Prior to that, he was Vice President  Finance of
Astec Advanced Power Services from December 1998 to July 1999,
and was Vice President  Europe of Moore Corp. from
November 1995 to November 1998.

David W. Carroll was appointed to his current position in
February 1992. He served as Director Environmental Affairs of
Lafarge from February 1990 to February 1992. Prior to that he
was Director Environmental Programs for the Chemical
Manufacturers Association from 1978 to 1990.

Kevin C. Grant was appointed to his current position effective
February 1998. He previously served as Treasurer of Lafarge from
June 1995 to February 1998. He served as Vice
President  Human Resources Development from June 1994
to June 1995. He also was Sales Manager from June 1992 to June
1994 and

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There is no family relationship between any of the executive
officers of Lafarge or its subsidiaries. None was selected as an
officer pursuant to any arrangement or understanding between him
and any other person. The term of office for each executive
officer of Lafarge expires at the first meeting of the Board of
Directors after the next annual meeting of stockholders
following his or her election or appointment and until his or
her successor is chosen and qualifies.




Item 2.  PROPERTIES

Information set forth in Item 1 of this Annual Report that
relates to the location and general character of the principal
plants, mineral reserves and other significant physical
properties owned in fee or leased by us is incorporated hereon
by reference in answer to this Item 2.

All of our cement plant sites (active and closed) and quarries
(active and closed), as well as terminals, grinding plants,
gypsum drywall plants and miscellaneous properties, are owned by
us free of major encumbrances, except the Exshaw cement plant,
the Kamloops limestone and cinerite quarries, and the Wilmington
and Continental Gypsum drywall plants.



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Exshaw plant is built on land leased from the province of
	Alberta. The original lease has been renewed for a 42-year term
	commencing in 1992. Annual payments under the lease are
	presently based on a fixed fee per acre.            
|
| |  | The Kamloops limestone and cinerite quarries are located on land
	leased from the province of British Columbia until March 2022.                                                                                                             
|
| |  | The Wilmington gypsum drywall facility is located at the Port of
	Wilmington, Delaware. The site is leased from Diamond State Port
	Corporation, an entity of the Delaware Department of
	Transportation. The lease expires in November 2020.
|
| |  | The manufacturing facilities of Continental Gypsum, which we
	acquired in January 2002, are leased from an unaffiliated third
	party under an agreement that expires in 2031.                                                                

The land, quarry, buildings and construction in progress related
to the cement plant that we are building in Sugar Creek,
Missouri are being leased from the City of Sugar Creek, Missouri
pursuant to a Chapter 100 bond financing. The lease expires
in 2020 and contains provisions that automatically transfer
ownership of the leased facilities to Lafarge at the end of the
lease term.

Limestone quarry sites for our cement manufacturing plants are
owned and are conveniently located near each plant, except for
Joppa, Richmond and Seattle quarries which are located
approximately 70, 80 and 180 miles, respectively, from their
plant sites.

Lafarge Canada Inc.s cement manufacturing plant limestone
quarrying rights in Quebec, Nova Scotia, Ontario, Alberta and
British Columbia are held under quarry leases, some of which
require annual royalty payments to provincial authorities. We
estimate that limestone reserves for the cement plants currently
producing clinker will be adequate to permit production at
present capacities for at least 20 years. Other raw
materials, such as clay, shale, sandstone and gypsum are either
obtained from reserves owned by us or are purchased from
suppliers and are readily available.

We have ready-mixed concrete and construction aggregate
operations extending from coast-to-coast in Canada. Our U.S.
activities are concentrated in the Rocky Mountain, midwestern,
north-central and northeast states and Louisiana. We have almost
1,000 locations that offer an extensive line of construction
materials, consisting primarily of crushed stone, sand, gravel
and other aggregate; ready-mixed concrete; concrete products
such as pipe, brick, block, paving stones and utility
structures; asphalt paving and road construction services; and
dry bagged goods.

Deposits of raw materials for our aggregate producing plants are
located on or near the plant sites. These deposits are either
owned by us or leased upon terms that permit orderly mining of
reserves.

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Item 3.  LEGAL PROCEEDINGS

In June 2001, Lafarge Canada Inc. (LCI) paid
Canadian $15.6 million (approximately U.S.
$10 million) in capital and interest, representing its
share of the damages awarded to the plaintiffs in a lawsuit
originating in 1992 (the 1992 lawsuit) arising from
claims of building owners, the Ontario New Home Warranty Program
and other plaintiffs regarding defective concrete foundations.
Earlier in 2001, the Ontario Court of Appeal had confirmed the
decision of the trial court which had attributed to LCI
80 percent of the liability for the damages incurred by the
plaintiffs on the basis that the problems in the concrete
foundations were caused by a product supplied by LCI. The
Supreme Court of Canada refused to hear LCIs appeal. We
believe our insurance coverage (on which the Court of Appeal has
yet to rule) will cover most of the damages paid to the
plaintiffs, as well as a large part of the defense expenses and
third party costs arising from the 1992 lawsuit. We have already
expensed or taken reserves for the amounts not expected to be
paid by our insurers. LCI is also involved as a defendant in a
related class action initiated in 1999. Approximately 215
homeowners have joined in the class action as potential
claimants. Although the outcome of any liability related to the
1999 class action cannot be predicted with certainty, we believe
that any liability that LCI may incur arising from the class
action will not have a material adverse effect on our financial
condition.

On March 28, 2001, Dunn Industrial Group, Inc. (Dunn
Industrial) filed a lawsuit against us and the City of
Sugar Creek, Missouri in the Circuit Court of Jackson County,
Missouri at Kansas City. In the suit, Dunn Industrial, the
general contractor for the construction of our new cement plant
in Sugar Creek, Missouri, alleges that we expanded the scope of
work expected of Dunn Industrial in the construction of the
plant without commensurate increases in time required for
performance and amounts to be paid to Dunn Industrial. In
connection therewith, the suit alleges breach of contract,
quantum meruit, breach of warranty and negligent
misrepresentation and seeks foreclosure of mechanics liens
against us and the City of Sugar Creek, Missouri. Dunn
Industrial appears to be seeking in excess of $67 million
in damages. The amount of our liability in connection with this
suit remains uncertain. To date, the trial court has considered
only whether issues raised by Dunn Industrial must be arbitrated
rather than litigated. We have appealed the trial courts
ruling that Dunn Industrial may proceed without first seeking
arbitration, on which ruling the appellate court has yet to
rule. We intend to vigorously defend the suit.

Currently, we are involved in one remediation under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, which together are referred to as
Superfund and the corrective action provisions of
the Resource Conservation and Recovery Act of 1976. At this
site, which the EPA has listed on the National Priority List,
some of the potentially responsible parties named by the EPA
have initiated a third-party action against 47 other parties,
including us. We also have been named a potentially responsible
party for this site. The suit alleges that in 1969 one of our
predecessor companies sold equipment containing hazardous
substances that may now be present at the site. It appears that
the largest disposer of hazardous substances at this new site is
the U.S. Department of Defense and numerous other large
disposers of hazardous substances are associated with this site.
We believe that this matter is not material to our financial
condition, results or operations or liquidity.

When we determine that it is probable that a liability for our
environmental matters or other legal actions has been incurred
and the amount of the loss is reasonably estimable, an estimate
of the required remediation costs or costs associated with the
other legal actions is recorded as a liability in the financial
statements. As of December 31, 2001, such recorded
liabilities for the environmental obligations are not material
to our financial statements. Although we believe such accruals
are adequate, we may incur costs in excess of the amounts
provided at December 31, 2001. However, we have concluded
that the possibility of material liability in excess of the
amount reported in the December 31, 2001 Consolidated
Balance Sheet is remote.

In the ordinary course of business, we are involved in certain
legal actions and claims, including proceedings under laws and
regulations relating to environmental and other matters. Because
such matters are subject to many uncertainties and the outcomes
are not predictable with assurance, the total amount of these
legal actions and claims cannot be determined with certainty.
Management believes that all legal and

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Item 4.  SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS

None during the fourth quarter ended December 31, 2001.




PART II




Item 5.  MARKET FOR OUR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

Information required in response to Item 5 is reported in
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations under the caption
Managements Discussion of Shareholders
Equity of this Annual Report, and is incorporated herein
by reference.

On March 12, 2002, 68,336,681 shares of Common Stock
(Common Stock) were outstanding and held by 3,510
record holders. In addition, on March 12, 2002, 4,209,963
Exchangeable Preference Shares of Lafarge Canada Inc., which are
exchangeable at the option of the holder into Common Stock on a
one-for-one basis and have rights and privileges that parallel
those of the shares of Common Stock, were outstanding and held
by 6,462 record holders.

We may obtain funds required for dividend payments, expenses and
interest payments on our debt from our operations in the U.S.,
dividends from subsidiaries or from external sources, including
bank or other borrowings.

30



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##### Table of Contents






Item 6.  SELECTED CONSOLIDATED FINANCIAL
DATA

|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |         | 
|-------------------------------------------------------- | -------------------- | -------------------------------------- | ------- | ------- |  | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                         |                      |                                       
|                                                         |                      | Years Ended December 31               
|                                                         |                      |                                       
|                                                         |                      | 2001                                   |         | 2000    |  | 1999 |         | 1998    |  | 1997
|                                                         |                      |                                        |         |         |  |      |         |         |  |     
|                                                         |                      |                                       
|                                                         |                      | (in millions except as indicated by *)
|                                                        
|                                                        
|                                                        
|                                                        
|Operating Results                                        |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|Net sales                                                |                      | $                                      | 3,323.0 |         |  | $    | 2,787.6 |         |  | $    | 2,721.6 |         |  | $ | 2,508.5 |         |  | $ | 1,842.9 |        
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Income Before the Following Items:                       |                      | $                                      | 401.1   |         |  | $    | 430.7   |         |  |      |         |         |  | $ | 407.0   |         |  | $ | 300.9   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Interest expense, net                                    |                      |                                        | (47.9   | )       |  |      | (26.9   | )       |  |      | (44.8   | )       |  |   | (27.2   | )       |  |   | (6.6    | )      
|                                                        
|                                                        
|                                                        
|                                                        
|Minority interests                                       |                      |                                        | (7.0    | )       |  |      |        |         |  |      |        |         |  |   |        |         |  |   |        |        
|                                                        
|                                                        
|                                                        
|                                                        
|Income taxes                                             |                      |                                        | (112.1  | )       |  |      | (146.4  | )       |  |      | (161.4  | )       |  |   | (144.3  | )       |  |   | (112.3  | )      
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Net Income                                               |                      |                                        | 234.1   |         |  |      | 257.4   |         |  |      | 275.4   |         |  |   | 235.5   |         |  |   | 182.0   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Depreciation, depletion and amortization                 |                      |                                        | 194.2   |         |  |      | 168.3   |         |  |      | 168.3   |         |  |   | 156.8   |         |  |   | 106.3   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Other items not affecting cash                           |                      |                                        | (5.2    | )       |  |      | 61.9    |         |  |      | (45.2   | )       |  |   | (16.2   | )       |  |   | 47.7    |        
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Net Cash Provided by Operations                          |                      | $                                      | 423.1   |         |  | $    | 487.6   |         |  | $    | 398.5   |         |  | $ | 376.1   |         |  | $ | 336.0   |        
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                         | Total Assets         |                                        | $       | 4,117.6 |  |      | $       | 3,902.6 |  |      | $       | 3,293.4 |  |   | $       | 2,892.5 |  |   | $       | 2,774.9 | 
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Financial Condition at
	December 31                      |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|Working capital                                          |                      | $                                      | 345.4   |         |  | $    | 336.1   |         |  | $    | 626.6   |         |  | $ | 524.4   |         |  | $ | (127.1  | )(a)   
|                                                        
|                                                        
|                                                        
|                                                        
|Property, plant and equipment, net                       |                      |                                        | 2,195.1 |         |  |      | 2,122.4 |         |  |      | 1,618.3 |         |  |   | 1,400.8 |         |  |   | 1,296.0 |        
|                                                        
|                                                        
|                                                        
|                                                        
|Other assets                                             |                      |                                        | 738.5   |         |  |      | 703.6   |         |  |      | 539.6   |         |  |   | 553.8   |         |  |   | 529.4   |        
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                         | Total Net Assets     |                                        | $       | 3,279.0 |  |      | $       | 3,162.1 |  |      | $       | 2,784.5 |  |   | $       | 2,479.0 |  |   | $       | 1,698.3 | 
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Long-term debt                                           |                      | $                                      | 674.6   |         |  | $    | 687.4   |         |  | $    | 710.3   |         |  | $ | 740.4   |         |  | $ | 135.2   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Other long-term liabilities and minority interests       |                      |                                        | 607.3   |         |  |      | 582.5   |         |  |      | 351.3   |         |  |   | 323.4   |         |  |   | 307.4   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Shareholders equity                                     |                      |                                        | 1,997.1 |         |  |      | 1,892.2 |         |  |      | 1,722.9 |         |  |   | 1,415.2 |         |  |   | 1,255.7 |        
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                         | Total Capitalization |                                        | $       | 3,279.0 |  |      | $       | 3,162.1 |  |      | $       | 2,784.5 |  |   | $       | 2,479.0 |  |   | $       | 1,698.3 | 
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Common Equity Share Information                          |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|Net income  basic*                                      |                      | $                                      | 3.25    |         |  | $    | 3.51    |         |  | $    | 3.79    |         |  | $ | 3.27    |         |  | $ | 2.56    |        
|                                                        
|                                                        
|                                                        
|                                                        
|Net income  diluted*                                    |                      | $                                      | 3.21    |         |  | $    | 3.51    |         |  | $    | 3.77    |         |  | $ | 3.24    |         |  | $ | 2.54    |        
|                                                        
|                                                        
|                                                        
|                                                        
|Dividends*                                               |                      | $                                      | 0.60    |         |  | $    | 0.60    |         |  | $    | 0.60    |         |  | $ | 0.51    |         |  | $ | 0.42    |        
|                                                        
|                                                        
|                                                        
|                                                        
|Book value at December 31*                               |                      | $                                      | 27.70   |         |  | $    | 26.27   |         |  | $    | 23.55   |         |  | $ | 19.57   |         |  | $ | 17.52   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Average shares and equivalents outstanding               |                      |                                        | 72.0    |         |  |      | 73.3    |         |  |      | 72.6    |         |  |   | 72.1    |         |  |   | 71.1    |        
|                                                        
|                                                        
|                                                        
|                                                        
|Shares outstanding at December 31                        |                      |                                        | 72.1    |         |  |      | 72.0    |         |  |      | 73.2    |         |  |   | 72.3    |         |  |   | 71.7    |        
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Statistical Data                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|Capital expenditures                                     |                      | $                                      | 333.2   |         |  | $    | 431.7   |         |  | $    | 315.7   |         |  | $ | 224.3   |         |  | $ | 124.0   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Acquisitions                                             |                      | $                                      | 80.6    |         |  | $    | 242.0   | (b)     |  | $    | 58.3    |         |  | $ | 99.3    | (c)     |  | $ | 8.8     |        
|                                                        
|                                                        
|                                                        
|                                                        
|Net income as a percentage of net sales*                 |                      |                                        | 7.0     | %       |  |      | 9.2     | %       |  |      | 10.1    | %       |  |   | 9.4     | %       |  |   | 9.9     | %      
|                                                        
|                                                        
|                                                        
|                                                        
|Return on average shareholders equity*                  |                      |                                        | 12.0    | %       |  |      | 14.2    | %       |  |      | 17.6    | %       |  |   | 17.6    | %       |  |   | 15.4    | %      
|                                                        
|                                                        
|                                                        
|                                                        
|Long-term debt as a percentage of total
	capitalization* |                      |                                        | 20.6    | %       |  |      | 21.7    | %       |  |      | 25.5    | %       |  |   | 29.9    | %       |  |   | 8.0     | %      
|                                                        
|                                                        
|                                                        
|                                                        
|Number of employees at December 31*                      |                      |                                        | 15,600  |         |  |      | 14,300  |         |  |      | 10,500  |         |  |   | 10,400  |         |  |   | 10,100  |        
|                                                        
|                                                        
|                                                        
|                                                        
|Exchange rate at December 31
	(Cdn. to U.S.)*            |                      |                                        | 0.628   |         |  |      | 0.667   |         |  |      | 0.692   |         |  |   | 0.654   |         |  |   | 0.699   |        
|                                                        
|                                                        
|                                                        
|                                                        
|Average exchange rate for the year (Cdn. to U.S.)*       |                      |                                        | 0.646   |         |  |      | 0.673   |         |  |      | 0.673   |         |  |   | 0.674   |         |  |   | 0.722   |        
|                                                         |                      |                                        |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        



---



|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes a liability of $690 million to Lafarge S.A. for
	the Redland acquisition, of which $40 million was repaid in
	1998 and the remaining $650 million was financed with
	long-term public debt in 1998. 
|   
|(b) | Excludes preferred shares and note payable totaling
	$127.7 million issued in conjunction with the Warren Paving
	& Materials Group merger treated as non-cash financing
	activities for cash flow reporting.
|   
|(c) | Excludes the Redland acquisition that was accounted for similar
	to a pooling of interests.                                                                                                                  

31



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##### Table of Contents








|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in
conjunction with the consolidated financial statements and notes
thereto.




MANAGEMENTS DISCUSSION OF INCOME

The Consolidated Statements of Income included in Item 8 of
this Annual Report summarize the operating performance of
Lafarge North America Inc. for the past three years. To
facilitate analysis, net sales and operating profit are
discussed by operating segment and are summarized in the table
below. (See Segment and Related Information in the
Notes to Consolidated Financial Statements for further segment
information.)

Our three operating segments are:

Construction Materials  the production and
distribution of construction aggregate, ready-mixed concrete,
other concrete products and asphalt, and the construction and
paving of roads.

Cement and Cement-Related Products  the
production and distribution of Portland and specialty cements
and slag, fly ash and associated blended products, and the
processing of fuel-quality waste and alternative raw materials
for use in cement kilns.

Gypsum  the production and distribution of
gypsum drywall and related products.

32



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##### Table of Contents



|                                                               |       |                        |         |         |   |      |         |         |   |   |         |         |  
|-------------------------------------------------------------- | ----- | ---------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                               |       |                       
|                                                               |       | Year Ended December 31
|                                                               |       |                       
|                                                               |       | 2001                   |         | 2000    |   | 1999
|                                                               |       |                        |         |         |   |     
|                                                               |       |                       
|                                                               |       | (in millions)         
|                                                              
|                                                              
|                                                              
|                                                              
|Net Sales                                                      |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                              
|                                                              
|                                                              
|                                                              
|Construction materials                                         |       | $                      | 2,073.8 |         |   | $    | 1,575.7 |         |   | $ | 1,486.4 |        
|                                                              
|                                                              
|                                                              
|                                                              
|Cement and cement-related products                             |       |                        | 1,238.4 |         |   |      | 1,215.4 |         |   |   | 1,202.8 |        
|                                                              
|                                                              
|                                                              
|                                                              
|Gypsum                                                         |       |                        | 152.4   |         |   |      | 134.1   |         |   |   | 152.5   |        
|                                                              
|                                                              
|                                                              
|                                                              
|Eliminations                                                   |       |                        | (141.6  | )       |   |      | (137.6  | )       |   |   | (120.1  | )      
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                               | Total |                        | $       | 3,323.0 |   |      | $       | 2,787.6 |   |   | $       | 2,721.6 |  
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|Gross Profit                                                   |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                              
|                                                              
|                                                              
|                                                              
|Construction materials                                         |       | $                      | 359.2   |         |   | $    | 281.8   |         |   | $ | 263.4   |        
|                                                              
|                                                              
|                                                              
|                                                              
|Cement and cement-related products                             |       |                        | 399.1   |         |   |      | 399.4   |         |   |   | 405.2   |        
|                                                              
|                                                              
|                                                              
|                                                              
|Gypsum                                                         |       |                        | (42.0   | )       |   |      | 7.1     |         |   |   | 56.7    |        
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                               | Total |                        |         | 716.3   |   |      |         | 688.3   |   |   |         | 725.3   |  
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|Operational Overhead and Other
	Expenses                       |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                              
|                                                              
|                                                              
|                                                              
|Construction materials                                         |       |                        | (123.6  | )       |   |      | (89.7   | )       |   |   | (73.9   | )      
|                                                              
|                                                              
|                                                              
|                                                              
|Cement and cement-related products                             |       |                        | (85.2   | )       |   |      | (81.1   | )       |   |   | (84.7   | )      
|                                                              
|                                                              
|                                                              
|                                                              
|Gypsum                                                         |       |                        | (27.4   | )       |   |      | (25.1   | )       |   |   | (14.8   | )      
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                               | Total |                        |         | (236.2  | ) |      |         | (195.9  | ) |   |         | (173.4  | )
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|Income From Operations                                         |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                              
|                                                              
|                                                              
|                                                              
|Construction materials                                         |       |                        | 235.6   |         |   |      | 192.1   |         |   |   | 189.5   |        
|                                                              
|                                                              
|                                                              
|                                                              
|Cement and cement-related products                             |       |                        | 313.9   |         |   |      | 318.3   |         |   |   | 320.5   |        
|                                                              
|                                                              
|                                                              
|                                                              
|Gypsum                                                         |       |                        | (69.4   | )       |   |      | (18.0   | )       |   |   | 41.9    |        
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                               | Total |                        |         | 480.1   |   |      |         | 492.4   |   |   |         | 551.9   |  
|                                                              
|                                                              
|                                                              
|                                                              
|Corporate and unallocated expenses                             |       |                        | (79.0   | )       |   |      | (61.7   | )       |   |   | (70.3   | )      
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|Earnings Before Minority Interests, Interest
	and Income Taxes |       | $                      | 401.1   |         |   | $    | 430.7   |         |   | $ | 481.6   |        
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|Assets                                                         |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                              
|                                                              
|                                                              
|                                                              
|Construction materials                                         |       | $                      | 1,701.6 |         |   | $    | 1,664.7 |         |   | $ | 1,239.1 |        
|                                                              
|                                                              
|                                                              
|                                                              
|Cement and cement-related products                             |       |                        | 1,097.8 |         |   |      | 1,052.1 |         |   |   | 1,098.3 |        
|                                                              
|                                                              
|                                                              
|                                                              
|Gypsum                                                         |       |                        | 260.4   |         |   |      | 279.4   |         |   |   | 125.1   |        
|                                                              
|                                                              
|                                                              
|                                                              
|Corporate, Redland goodwill and unallocated assets             |       |                        | 1,057.8 |         |   |      | 906.4   |         |   |   | 830.9   |        
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        
|                                                               | Total |                        | $       | 4,117.6 |   |      | $       | 3,902.6 |   |   | $       | 3,293.4 |  
|                                                               |       |                        |         |         |   |      |         |         |   |   |         |        

YEAR ENDED DECEMBER 31, 2001

Net Sales

Our net sales increased 19 percent in 2001 to
$3,323.0 million from $2,787.6 million in 2000. U.S.
net sales were $2,023.8 million, an increase of
$119.4 million or six percent. Sales volumes increased in
all main product lines due to strong demand for our products and
acquisitions. Additionally, aggregate and ready-mixed concrete
selling prices increased as well. These increases were partly
offset by lower average selling prices for gypsum drywall and
cement. Despite the devaluation in the Canadian dollar, Canadian
net sales improved $416.0 million, or 47 percent, to
$1,299.2 million. This increase was driven by recent
acquisitions, most significantly the December 2000 merger with
the Warren Paving & Materials Group. In addition, our
heritage operations contributed to the Canadian net sales
increase as ready-mixed concrete, aggregate and cement sales
volumes increased by four percent, five percent and four
percent, respectively.

33



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##### Table of Contents



Construction Materials

Net sales from construction materials operations reached a new
high of $2,073.8 million, a 32 percent increase from
2000, reflecting improved sales volumes and average selling
prices in both the U.S. and Canada. Overall ready-mixed concrete
shipments were 11.5 million cubic yards in 2001, seven
percent higher than 2000, and aggregate sales volumes were
120.9 million tons, 29 percent higher than 2000.
Asphalt and paving sales reached $740.0 million, up
97 percent from 2000. The Warren Paving & Materials
Group operations acquired in December 2000 and other recent
acquisitions accounted for most of the improvement in shipments
compared to last year. In the U.S., net sales increased by
$90.1 million, or 10 percent, to $983.6 million.
Ready-mixed concrete sales volumes increased by eight percent
mainly due to strong demand and the acquisition, in February
2001, of Pine Hill Materials Corp. and American Readi-Mix
Concrete Corporation, partially offset by lower sales volumes in
Wisconsin where we sold our operations in the fourth quarter of
2001. Average selling prices for ready-mixed concrete in the
U.S. increased by four percent due to implemented price
increases and increased sales of higher-value ready-mixed
concrete. Aggregate sales volumes in the U.S. increased by
13 percent due to the impact from recent acquisitions and a
three percent increase in our heritage operations. Aggregate
average selling prices increased by one percent compared to
2000. In Canada, net sales increased by $408.0 million, or
60 percent, to $1,090.2 million. Ready-mixed concrete
sales volumes in Canada increased six percent from 2000 levels
primarily due to increased demand brought on by the strength of
the Toronto economy and the absence of the effect of a
ready-mixed concrete drivers strike in Toronto in 2000.
Ready-mixed concrete average selling prices increased by three
percent in local currency, however, due to the devaluation of
the Canadian dollar, average selling prices declined one percent
in U.S. dollars. The increase in average selling price resulted
from general price increases and increased sales of higher value
ready-mixed concrete. Canadian aggregate sales volumes were 47
percent ahead of 2000 levels mainly due to the merger with the
Warren Paving & Materials Group at the end of 2000.
Excluding the impact of the Warren operations, aggregate sales
volumes increased six percent. Aggregate average selling prices
increased six percent in local currency, however, due to the
devaluation of the Canadian dollar, the effective increase in
U.S. dollars was reduced to two percent. The average selling
price was also favorably impacted by product and customer mix.
Asphalt and paving sales increased 300 percent to
$453.3 million, as heritage operations increased
16 percent with the Warren Paving & Materials Group
accounting for the balance of the improvement.

Cement and Cement-Related Products

Net sales from cement operations increased by two percent to
$1,238.4 million from $1,215.4 million in 2000 due to
increased sales volumes. Cement sales volumes totaled
14.4 million tons, a two percent increase from 2000, while
the average selling price per ton in U.S. dollars, net of
freight costs (net realization), declined slightly.
U.S. net sales increased by $15.6 million to
$935.0 million, as the benefit from mild weather in the
fourth quarter led to a two percent increase in cement
shipments. Net realization in the U.S. declined one percent due
to competitive pressures in certain markets and product and
customer mix. Canadian cement net sales increased three percent
to $303.4 million from $296.0 million in 2000. Cement
shipments in Canada increased by four percent primarily due to
the strong economy in Ontario and favorable weather in the
fourth quarter. Net realization rose by four percent in local
currency, however, due to the devaluation of the Canadian
dollar, the effective increase in U.S. dollars was reduced to
one percent. The increase in net realization resulted from
annual price increases and improved product and market mix. Also
included in sales from our cement operations are sales of
cement-related products of $113.6 million, a seven percent
increase from 2000, representing 3.8 million tons of slag
and fly ash.

Gypsum

Net sales from gypsum operations increased by 14 percent to
$152.4 million from $134.1 million in 2000. Drywall
sales volumes increased 77 percent while average selling
prices declined nearly 42 percent compared to 2000. The
volume increase reflects sales of 404 million square feet
of drywall from our new Palatka, Florida plant, which started
production in January 2001, as well as the ramp-up of production
at our Silver Grove, Kentucky plant, where sales volumes
increased 447 million square feet over last year. Drywall
prices continued

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Gross Profit and Cost of Goods Sold

Gross profit as a percentage of net sales decreased to
22 percent from 25 percent in 2000, primarily reflecting a
significant decline in gypsum results.

Construction materials gross profit as a percentage of net sales
declined slightly to 17 percent in 2001 from
18 percent in 2000 due to a change in our product portfolio
to more asphalt and paving, which has lower margins, arising
from the December 2000 merger with the Warren Paving &
Materials Group.

Cement gross profit as a percentage of net sales decreased
slightly to 32 percent compared to 33 percent in 2000. The
average cash production cost per ton of cement in 2001 was equal
to 2000 as lower fixed costs resulting from continued emphasis
on performance improvement in our production facilities were
offset by higher variable costs, primarily energy. The cash
production cost per ton increased slightly in the U.S. due to
purchased clinker at our Sugar Creek, Missouri plant, but were
offset by operating efficiencies at our Canadian plants. The
following table summarizes our cement and clinker production (in
millions of tons) and the clinker production capacity
utilization rate:

|                             |  |             |       |      |  |  |       |  
|---------------------------- |  | ----------- | ----- | ---- |  |  | ----- | -
|                             |  |            
|                             |  | Years Ended
|                             |  | December 31
|                             |  |            
|                             |  | 2001        |       | 2000
|                             |  |             |       |     
|Cement production            |  |             | 13.60 |      |  |  | 13.53 |  
|                            
|                            
|                            
|                            
|Clinker production           |  |             | 11.72 |      |  |  | 11.93 |  
|                            
|                            
|                            
|                            
|Clinker capacity utilization |  |             | 90    | %    |  |  | 92    | %
|                             |  |             |       |      |  |  |       |  

Cement production was essentially in line with 2000, while
clinker production declined two percent. U.S. cement production
totaled 8.2 million tons, down one percent, while Canadian
cement production increased four percent to 5.4 million
tons. Clinker capacity utilization at U.S. plants declined to
94 percent from 96 percent due to slightly reduced
production at several plants. Canadian clinker capacity
utilization decreased slightly to 86 percent from
87 percent largely the result of decreased production at
our Exshaw, Alberta plant where we extended the normal winter
shutdown through the first quarter 2001 to help mitigate
exorbitant gas prices.

Gypsum operations reflect a negative gross profit as a
percentage of net sales of 28 percent, a decrease of
33 percentage points from 2000, due to the erosion of
selling prices during 2001, costs associated with the start-up
of a paper mill joint venture and the new production facility in
Palatka, Florida, and increased energy costs.

Selling and Administrative Expenses

Selling and administrative expenses were $296.1 million in
2001 compared with $269.4 million in 2000. The increase
resulted from growth in our construction materials operations
and costs associated with the implementation of the shared
service center for our construction materials group. However,
selling and administrative expenses as a percentage of net sales
decreased to 8.9 percent from 9.7 percent in 2000, as
efficiency programs helped to mitigate inflationary cost
increases.

Goodwill Amortization

Amortization of goodwill was $20.6 million in 2001 and
$17.2 million in 2000. The increase reflects amortization
of goodwill resulting from the merger with the Warren Paving
& Materials Group. In 2002, we plan to fully adopt Statement
of Financial Accounting Standards (SFAS)
No. 142, which requires that goodwill and intangible assets
with indefinite lives not be amortized but rather be reviewed
annually for impairment.

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Other Income, Net

Other income, net consists of a variety of items that management
believes are non-operating in nature. Key categories (with
amounts for 2001 and 2000, respectively) include gains on sale
of fixed assets ($8.0 million and $9.5 million), gains on
divestitures of businesses ($23.2 million and
$6.3 million), loss on the sale of receivables under our
securitization program ($7.1 million and
$3.0 million), losses on natural gas commodity contracts
($8.1 million and zero), losses or gains for other
postretirement benefit expense for retirees and pension costs
($6.9 million loss and $4.1 million gain), equity
income ($2.8 million and $6.9 million), expenses for
restructuring ($7.1 million and zero), foreign exchange
transaction gains or losses ($0.3 million loss and $2.5
million gain), Blue Circle management fees ($5.6 million
and zero) and other miscellaneous gains or losses
($8.7 million loss and $2.7 million net gain).
Divestment gains in 2001 related primarily to the disposal of
our joint venture interest in Centennial Concrete Pipe &
Products and non-strategic ready-mixed concrete businesses in
Milwaukee, Wisconsin. The loss on the natural gas forward
contracts resulted from recording a liability on the fair value
of the commodity contracts in accordance with SFAS No. 133
due to a decline in forward gas prices below the fixed
contractual amounts. Restructuring costs in 2001 relate to the
costs associated with reorganizing the cement business in the
second half of 2001.

Performance by Line of Business

Construction Materials

Operating profit from construction materials operations (before
corporate and unallocated expenses) was $235.6 million,
$43.5 million higher than 2000. This increase was driven by
$29.0 million of contribution from the Warren operations,
which were not part of Lafarge in 2000, positive contributions
from other recent acquisitions and improvements in our heritage
operations. Ready-mixed concrete and aggregate sales volumes and
average selling prices both increased compared to 2000. These
items were partially offset by a change in our product portfolio
as the paving business, which operates at lower margins,
represents a more significant portion of our total portfolio.
U.S. operations earned $131.2 million, $15.0 million
better than 2000. This increase was due to higher ready-mixed
concrete and aggregate sales volumes of eight percent and
13 percent, respectively, and higher average selling prices
for ready-mixed concrete and aggregate of four percent and one
percent, respectively. These improvements were partially offset
by increased rental expense and repair and maintenance costs.
Despite a $4.5 million reduction in earnings due to the
impact of the weaker Canadian dollar, the Canadian operations
earned $104.4 million, $28.5 million better than 2000.
The increased earnings were due to higher ready-mixed concrete
and aggregate sales volumes of six percent and 47 percent,
respectively, and higher average selling prices of three percent
and six percent, respectively, in local currency. However, due
to the devaluation of the Canadian dollar, ready-mixed concrete
average selling prices declined one percent in U.S. dollars and
aggregate average selling prices increased only two percent in
U.S. dollars. These items were partially offset by increased
repair and maintenance costs.

Cement and Cement-Related Products

Operating profit from cement operations (before corporate and
unallocated expenses) was $313.9 million, a
$4.4 million or one percent decline from 2000. The decrease
resulted primarily from a decline in the Canadian dollar and
start-up-related costs for the new production line at our Sugar
Creek, Missouri plant. During the second half of 2001, we
reorganized our cement operations into five geographic regions.
The new organization, designed to better serve our customers,
was implemented effective January 1, 2002. In the U.S.,
operating profit totaled $200.4 million, $18.6 million
or eight percent lower than 2000. The decrease resulted from a
slight decline in net realization due to competitive pressures
in certain markets and increased fuel and power costs, which
were largely offset by a two percent increase in sales volumes.
There was also an increase in distribution costs arising from
the spring flooding of the Mississippi River, as well as
start-up costs for our new kiln line outside Kansas City,
Missouri, which cost approximately $8 million. Our Canadian
cement operations reported an operating profit of
$113.5 million, $14.2 million higher than in 2000,
despite a $4.9 million reduction in earnings due to the
impact of the weaker Canadian dollar. The increased earnings
were primarily due to increased sales volumes of four percent
and net realization of four percent in local currency. However,
due to the devaluation of the Canadian dollar, the effective
increase in U.S. dollars was

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Gypsum

Our gypsum drywall operations reported an operating loss of
$69.4 million, $51.4 million higher than last
years operating loss of $18.0 million. The decrease
in profitability was due to depressed drywall prices, increased
energy costs, higher fixed costs associated with the start-up of
a paper mill joint venture and increased operating costs
associated with the start-up of the new Palatka, Florida drywall
plant. Our Silver Grove and Palatka drywall plants have both
consistently improved their efficiency throughout the year and
costs have progressively come down in both plants. In the fourth
quarter, the Silver Grove plant operated at a modest profit
while the Palatka plant was slightly below the breakeven level.

Earnings Before Minority Interests, Interest and Income Taxes
(EBIT)

In 2001, EBIT was $401.1 million, a $29.6 million or
seven percent decline from 2000. This drop in profitability was
affected by a $51.4 million decline in our gypsum
segments results as well as approximately $16 million
of non-recurring costs and a $8.9 million impact from a
decline in the value of the Canadian dollar. These were
partially offset by the $24.1 million gains on sale of
assets, including the sale of our joint venture interest in
Centennial Concrete Pipe & Products and certain
non-strategic ready-mixed concrete businesses in Wisconsin. The
non-recurring costs consisted of $8 million of natural gas
derivative expense that is expected to reverse in 2002 and $8
million of fixed costs related to the new Sugar Creek, Missouri
cement plant scheduled to start-up in the first half of 2002.
EBIT in the U.S. was $203.1 million, $72.8 million lower
than 2000. EBIT from Canadian operations was
$198.0 million, $43.2 million higher than 2000 despite
a devaluation in the Canadian dollar which had an impact of
$8.9 million.

Interest Expense

Interest expense increased by $3.9 million in 2001 to
$54.5 million primarily due to higher debt levels in 2001.
Interest capitalized was $11.1 million and $11.7 million in
2001 and 2000, respectively.

Interest Income

Interest income decreased $17.1 million in 2001, primarily
from the absence this year of the favorable impact on last
years results of the $11.5 million interest receivable
from the Canadian Customs and Revenue Agency recorded from the
settlement of transfer pricing and cost sharing issues for the
1986 to 1994 calendar years (see Income Taxes in the
Notes to the Consolidated Financial Statements for further
information). The remaining decline relates primarily to a
decrease in short-term investments in Canada (see
Managements Discussion of Cash Flows) and a reduction in
interest rates.

Income Taxes

Income tax expense decreased from $146.5 million in 2000 to
$112.1 million in 2001 mostly from lower 2001 U.S. pre-tax
income and the impact of lower federal and provincial tax rates
in Canada. The 2001 income tax benefited from a one-time
adjustment of approximately Canadian $23 million
(approximately U.S. $15 million) to reduce deferred tax
balances to reflect the reduction in Canadian tax rates. We
expect the multi-year relief plan to positively impact earnings
from Canadian operations going forward. Excluding this one-time
adjustment, our effective income tax rate increased to
36.8 percent for 2001 compared to 36.3 percent in 2000
due to the impact of non-tax deductible dividends paid to
minority interests in 2001.

Net Income

We reported net income of $234.1 million in 2001 compared
with $257.4 million in 2000. The major reason for the decline in
profitability was the losses incurred in our gypsum operations,
as well as non-recurring

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General Outlook

The company finished the year 2001 on a solid note as demand for
our products remained strong throughout the fourth quarter,
after recovering from a disappointing month of September.
However, the economic outlook in the U.S. remains uncertain and
we do not expect that there will be a clear sign of the trend of
the construction business until the construction season begins
in the spring.

The Portland Cement Association has forecasted a
5.0 percent reduction in U.S. cement demand for 2002. If
that forecast is accurate, it would negatively impact our
business and profitability. Therefore, we are approaching the
year with some caution. We are focused on factors that we can
control, such as performance improvement in our manufacturing
and distribution operations, and we are taking those actions
that we deem appropriate to provide the flexibility in our
operations that will allow us to respond to unexpected changes,
up or down, in the economic environment.

For our gypsum operations, we believe that price softness is
likely to continue in the first quarter of 2002 when business is
typically slower. We have announced new price increases to be
implemented in early March 2002. We will continue to seek to
optimize our network of plants, and in particular to reduce
costs in the older northeast facilities. A positive factor for
2002 is our paperboard liner joint venture that is now producing
paperboard liner, which we expect to benefit from in 2002 with
lower-cost materials. Also, in January 2002 we acquired
Continental Gypsum, which is based in Newark, New Jersey. This
acquisition should strengthen our presence in the Northeast
market.

YEAR ENDED DECEMBER 31, 2000

Net Sales

Our net sales increased by two percent in 2000 to
$2,787.6 million from $2,721.6 million in 1999. U.S.
net sales remained relatively unchanged from 1999 levels at
$1,904.4 million as the result of several factors: lower
ready-mixed concrete and cement sales volumes due to poor
weather conditions in the fourth quarter and lower average
selling prices for gypsum drywall. These factors were mostly
offset by aggregate sales volumes from the Presque Isle
acquisition and increased ready-mixed concrete and cement
average selling prices due to implemented increases and changes
in product mix. Canadian net sales were $883.2 million, an
increase of $66.7 million or eight percent. The increase
was due to improving economic conditions in eastern Canada,
increased infrastructure spending and project work in British
Columbia and a strong oil and gas marketplace in northern
Alberta, which helped improve ready-mixed concrete, aggregate
and cement sales volumes and average selling prices.

Construction Materials

Net sales from construction materials operations in the U.S. and
Canada were $1,575.7 million, an increase of six percent
from 1999. Overall ready-mixed concrete shipments to customers
were 10.7 million cubic yards in 2000, two percent higher
than 1999, and aggregate sales volumes were 93.6 million tons,
15 percent higher than 1999. In the U.S., net sales
increased by $14.5 million, or two percent, to
$893.5 million. Ready-mixed concrete sales volumes
decreased by one percent. Average selling prices for ready-mixed
concrete in the U.S. regions increased by four percent due to
implemented price increases and increased sales of higher-value
ready-mixed concrete. Aggregate sales volumes in the U.S.
increased by 18 percent, of which six percent was due to
growth in our existing operations with the remainder coming from
volumes associated with the Presque Isle, Michigan quarry
acquired in June 2000. Despite general price increases, average
selling prices decreased by four percent when compared to 1999.
The reduced selling price was due to increased sales of
lower-valued products and the impact of the Presque Isle quarry,
which, because of its product mix, brought with it lower average
prices than existing U.S. operations. In Canada, net sales
increased by $74.8 million, or 12 percent, to
$682.2 million, reflecting an increase in both sales
volumes and

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Cement and Cement-Related Products

Net sales from cement operations increased by one percent to
$1,215.4 million from $1,202.8 million in 1999 due to
higher average selling prices. Cement sales volumes declined by
0.2 million tons to 14.1 million tons, which
represents a one percent decline, while the average selling
price per ton to customers, net of freight costs (net
realization), increased by 1.5 percent. U.S. net
sales decreased by $1.3 million to $919.4 million.
Cement shipments through September were ahead of 1999, but due
to a 15 percent decline in the fourth quarter brought on by
heavy snowfall and extremely cold weather, annual cement
shipments declined three percent. Net realization in the U.S.
increased only one percent due to competitive pressures in our
markets. Canadian cement sales increased five percent to
$296.0 million from $282.1 million in 1999. Cement
shipments in Canada increased by four percent and net
realization rose by two percent. The improvement in volumes was
primarily due to a strong Northern Alberta market, again in oil
and gas infrastructure spending, increased oil well cement sales
and expanded project work. The increase in net realization
resulted from improved product mix and annual price increases.
Also included in sales of our cement operations are sales of
cement-related products of $106 million, representing
2.8 million tons of slag and fly ash. This represents a
nine percent increase in sales from 1999.

Gypsum

Despite a one percent increase in sales volumes, net sales from
gypsum operations decreased by 12 percent to
$134.1 million from $152.5 million in 1999. Average
selling prices declined nearly 20 percent compared to 1999
due to increased capacity in the industry and lower demand, with
year-end prices more than 50 percent below those at
year-end 1999. The volume increase is due to 137 million
square feet of drywall sold from our new Silver Grove, Kentucky
plant, which started production in June 2000. This increase was
mostly offset by reduced sales of imported drywall and a decline
in sales of drywall from our Newfoundland, Canada plant. A new
drywall plant in northern Florida began operating in early 2001.

Gross Profit and Cost of Goods Sold

Gross profit as a percentage of net sales decreased to
25 percent from 27 percent in 1999, reflecting a
significant decline in gypsum results and modest reductions in
the cement operations.

Construction materials gross margin as a percentage of net sales
remained at 18 percent in 2000. This was due to higher
ready-mixed concrete average selling prices in the U.S. and
Canada and higher aggregate average selling prices in Canada.
These factors were offset by higher material and fuel costs in
all regions and increased operating costs in the western U.S.
and in eastern and western Canada, as well as lower aggregate
average selling prices in the U.S.

Cement gross profit as a percentage of net sales declined to
33 percent compared to 34 percent in 1999. The decline
was the result of a four percent increase in cash production
cost per ton partially offset by higher average selling prices.
In the U.S., cash production cost per ton increased slightly
compared to 1999. In Canada, cash production cost per ton
increased by nine percent, primarily due to increased natural
gas costs at the Exshaw, Alberta plant and increased maintenance
and purchased clinker costs at the Bath, Ontario plant,
partially offset by lower maintenance and fuel costs and other
operating efficiencies associated with the new

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|                             |  |             |       |      |  |  |       |  
|---------------------------- |  | ----------- | ----- | ---- |  |  | ----- | -
|                             |  |            
|                             |  | Years Ended
|                             |  | December 31
|                             |  |            
|                             |  | 2000        |       | 1999
|                             |  |             |       |     
|Cement production            |  |             | 13.53 |      |  |  | 13.55 |  
|                            
|                            
|                            
|                            
|Clinker production           |  |             | 11.93 |      |  |  | 11.76 |  
|                            
|                            
|                            
|                            
|Clinker capacity utilization |  |             | 92    | %    |  |  | 97    | %
|                             |  |             |       |      |  |  |       |  

Cement production was essentially in line with 1999, while
clinker production was one percent higher than 1999. U.S. cement
production totaled 8.3 million tons, down two percent.
Clinker capacity utilization at U.S. plants declined to
96 percent due to increases in capacity at several plants
and slightly reduced production. Canadian cement production was
5.2 million tons, up three percent. Canadian clinker
capacity utilization decreased to 87 percent from
92 percent. This decline was due to an increase in
capacity, compared to prior year, at the Richmond, British
Columbia plant.

Gypsums gross profit as a percentage of net sales
decreased by 32 percentage points to five percent, primarily due
to erosion of selling prices during 2000 resulting from
increased capacity in the industry, slowing demand, costs
associated with the start-up of two new production facilities,
as well as increased raw material and energy costs.

Selling and Administrative Expenses

Selling and administrative expenses were $269.4 million in
2000 compared with $235.0 million in 1999. The increase was
due to growth in our construction materials business, increased
staffing (particularly in the human resource and strategic
development functions), the restructuring of the Canadian gypsum
operations, increased costs to support the 1.8 billion
square foot increase of gypsum drywall production capacity,
costs associated with establishing a shared service center in
our construction materials operations and the study and
integration of several acquisitions throughout the year. Selling
and administrative expenses as a percentage of net sales
increased to 9.7 percent from 8.6 percent in 1999.

Goodwill Amortization

Amortization of goodwill was $17.2 million in both 2000 and
1999. We continually evaluate whether events and circumstances
have occurred that indicate the remaining estimated useful life
of goodwill may warrant revision or that the remaining balance
of goodwill may not be recoverable. In 2002, we plan to fully
adopt SFAS No. 142, which requires that goodwill and
intangible assets with indefinite lives not be amortized but
annually reviewed for impairment.

Other Income, Net

Other income, net, consists of items such as equity income and
gains and losses from divestitures. Other income, net, was
$29.0 million in 2000 compared with $8.5 million in
1999. The $20.5 million increase was primarily due to
increased pension income of $11.8 million, lower other
postretirement benefit expense for retirees of $2.8 million
and higher gains on asset dispositions of $3.0 million.

Performance by Line of Business

Construction Materials

Operating profit from construction materials operations (before
corporate and unallocated expenses) was $192.1 million,
$2.6 million higher than 1999. The improvement was due to
higher ready-mixed concrete and aggregate sales volumes and
higher average selling prices for ready-mixed concrete. These
items were partially offset by higher liquid asphalt, diesel and
natural gas costs in most regions. The significant increase in
the cost of natural gas, diesel and liquid asphalt, as well as
the costs associated with implementing a number of

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Cement and Cement-Related Products

Operating profit from cement operations (before corporate and
unallocated expenses) was $318.3 million, a
$2.2 million or one percent decline from 1999. The decline
was due to lower cement sales volumes and higher energy and
operating costs, partially offset by increased net realization
due to general price increases. For the full year, energy cost
increases for process fuel and delivery totaled approximately
$12 million. The most significant impact was at our Exshaw,
Alberta plant. In the U.S., where we burn primarily coal and
petroleum coke, the process fuel cost increase was limited.
However, freight costs, particularly in the second half of the
year, were affected more significantly. In the U.S., operating
profit was $219.0 million, $3.5 million (two percent)
lower than 1999. The decline resulted from lower cement sales
volumes of three percent due largely to poor weather in the
fourth quarter and increased transportation costs. Our Canadian
cement operations reported an operating profit of
$99.3 million, $1.3 million higher than in 1999,
primarily due to increased sales volumes of four percent and net
realization of two percent, which was largely offset by rising
fuel costs and increased maintenance and purchased clinker at
the Bath, Ontario plant. Operating profit from our
cement-related products (slag and fly ash) included in the
cement results was $22.0 million, an increase of
$2.0 million from 1999.

Gypsum

Our gypsum drywall operations reported an operating loss of
$18.0 million, a $59.9 million decline from
1999s operating profit of $41.9 million. The swing in
profitability was due to declining drywall prices, rising raw
material costs, increased energy costs, costs associated with
the start-up of the new Silver Grove, Kentucky plant in 2000,
preparations to start-up the new Palatka, Florida plant in 2001,
and additional administrative and marketing costs required to
support a 1.8 billion square foot increase in production
capacity. Average selling prices declined nearly 20 percent
compared to 1999 with year-end prices off more than
50 percent from a year ago.

Earnings Before Minority Interests, Interest and Income Taxes
(EBIT)

In 2000, EBIT was $430.7 million, a $50.9 million
(11 percent) decline from 1999. This drop in profitability
was due to the $59.9 million swing in our gypsum
segments results. Through the first three quarters of
2000, improvements in our construction materials and cement
segments largely offset the reduction in gypsum profitability.
However, heavy snowfall and extremely cold weather in the last
quarter reversed these earlier gains. EBIT in the U.S. was
$275.9 million, $58.6 million lower than 1999. EBIT
from Canadian operations was $154.8 million,
$7.7 million higher than 1999.

Interest Expense

Interest expense decreased by $12.1 million in 2000 to
$50.6 million primarily due to an increase in capitalized
interest. Interest capitalized was $11.7 million and
$4.7 million in 2000 and 1999, respectively.

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Interest Income

Interest income increased $5.8 million in 2000. This
increase is composed of $11.5 million of interest
receivable from the Canadian Customs and Revenue Agency recorded
as the result of the settlement of transfer pricing and cost
sharing issues for the 1986 to 1994 calendar years (see
Income Taxes in the Notes to Consolidated Financial
Statements for further information). This was partially offset
by lower average Canadian short-term investment balances during
2000.

Income Taxes

Income tax expense decreased from $161.4 million in 1999 to
$146.5 million in 2000, primarily due to lower profits in
2000 in the U.S. and a reduction in our effective income tax
rate to 36.3 percent in 2000 from 37.0 percent in 1999.

Net Income

We reported net income of $257.4 million in 2000 compared
with $275.4 million in 1999. The major reason for the decline in
profitability was the losses incurred in our gypsum operations,
as well as higher energy costs and higher selling and
administrative expenses.

Other Factors Affecting the Company

Critical Accounting Policies

Certain of our critical accounting policies require the use of
judgment in their application or require estimates of inherently
uncertain matters. Although our accounting policies are in
compliance with generally accepted accounting principles, a
change in the facts and circumstances of the underlying
transactions could significantly change the application of the
accounting policy and the resulting financial statement impact.
Listed below are those policies that we believe are critical and
require the use of complex judgment in their application.

Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of We account for long-lived assets in
accordance with the provisions of SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets is measured by
comparing the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset. Such
evaluations for impairment are significantly impacted by
estimates of future prices for our products, capital needs,
economic trends in the construction sector and other factors. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reflected at the lower of their
carrying amount or fair value less cost to sell.

Goodwill Goodwill is amortized using the
straight-line method over periods not exceeding 40 years.
We continually evaluate whether events and circumstances have
occurred that indicate the remaining estimated useful life of
goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. In evaluating impairment, we
estimate the sum of the expected future cash flows, undiscounted
and without interest charges, derived from such goodwill over
its remaining life. Similar to our review for impairment of
other long-lived assets, evaluations for impairment are
significantly impacted by estimates of future prices for our
products, capital needs, economic trends in the construction
sector and other factors.

Environmental Remediation Liabilities  When we
determine that it is probable that a liability for environmental
matters has been incurred, an undiscounted estimate of the
required remediation costs is recorded as a liability in the
consolidated financial statements, without offset of potential
insurance recoveries. Costs that extend the life, increase the
capacity or improve the safety or efficiency of company-owned
assets or are incurred to mitigate or prevent future
environmental contamination may be capitalized. Other
environmental costs are expensed when incurred.

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Revenue Recognition  Revenue from the sale of
cement, concrete, concrete products, aggregate and gypsum
drywall is recorded when the products are shipped. Revenue from
waste recovery and disposal is recognized when the material is
received, tested and accepted. Revenue from road construction
contracts is recognized on the basis of units of work completed,
while revenue from other indivisible lump sum contracts is
recognized using the percentage-of-completion method. Amounts
billed to a customer in a sales transaction related to shipping
and handling are included in net sales, and costs
incurred by the seller for shipping and handling are classified
as cost of goods sold.

Derivative Instruments and Hedging Activities We
use commodity-based derivatives to manage our exposure to
commodity price fluctuations. We periodically enter into natural
gas forward purchase agreements for a portion of our anticipated
gas purchases to hedge price risk associated with fluctuations
in market prices. To the extent possible, we elect to apply the
normal purchases or sales exception in accordance with SFAS
No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an Amendment of SFAS
133. Normal purchases and normal sales are contracts that
provide for the purchase or sale of something other than a
financial instrument or derivative instrument that will be
delivered in quantities expected to be used or sold by us over a
reasonable period in the normal course of business. Often this
exception to the requirements of SFAS No. 133,
Accounting for Certain Derivative Instruments and Certain
Hedging Activities, will apply to purchases of commodities
used on our production process that would otherwise be
considered derivative instruments. When applied, this exception
allows us to not recognize these derivatives on the balance
sheet at their fair value as required by SFAS No. 133.

When the normal purchases or sales exception is not applied, the
derivatives are recognized on the balance sheet at their fair
value. We may execute derivatives for purposes of hedging
various commodity price and financial exposures. For those
derivatives that qualify for hedge accounting, on the date the
derivative contract is entered into we designate the derivative
and document the hedge relationship as either a fair value or
cash flow hedge in accordance with the requirements of SFAS
No. 133. We formally document all relationships between
hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various
hedge transactions. This process includes linking all
derivatives that are designated as fair value, cash flow or
foreign currency hedges to specific assets and liabilities on
the balance sheet or to specific firm commitments or forecasted
transactions. We also formally assess, both at the hedge
relationships inception and on an ongoing basis, whether
the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of
hedged items. When it is determined that a derivative is not
highly effective as a hedge or that it has ceased to be a highly
effective hedge, we discontinue hedge accounting prospectively.
The company will only apply hedge accounting to those
relationships that have been properly designated and documented
and are anticipated to be highly effective.

Classification of a change in a derivatives fair value is
determined by whether the derivative is designated in a
qualifying hedge relationship. For a derivative in a qualifying
cash flow hedge, the effective portion of the derivatives
fair value change is reported as a component of
accumulated other comprehensive income (loss) in the
Consolidated Balance Sheets and in the Consolidated Statements
of Shareholders Equity. For a derivative in a qualifying
fair value hedge, effective changes in the fair value are
reported in the Consolidated Statements of Income, along with
changes in the value of the hedged item for the risk being
hedged. In both fair value and cash flow hedge relationships,
any hedge ineffectiveness is reported as a component of
other income, net in the current periods
Consolidated Statement of Income.

Environmental Matters

Our operations, like those of our competitors, are subject to
state, federal, local and Canadian environmental laws and
regulations, which impose liability for cleanup or remediation
of environmental pollution and hazardous waste arising from past
acts; and require pollution control and prevention, site
restoration and operating permits and/or approvals to conduct
certain of our operations. Federal environmental laws that
impose liability for remediation include the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act
of 1986, which together are referred to as
Superfund, and the corrective action provisions of
the Resource Conservation and Recovery Act of 1976
(RCRA). Under Superfunds current broad
liability provisions, the

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To prevent, control and remediate environmental problems and
maintain compliance with permitting requirements, we maintain an
environmental program designed to monitor and control
environmental matters. This program is based upon our
environmental policy and includes recruitment, training and
retention of personnel experienced in environmental matters.
Company employees are responsible for identifying potential
environmental issues and bringing them to the attention of
management who are responsible for addressing environmental
matters. In this regard, we require operational management to
immediately report to corporate management any spills or
material instances of non-compliance. Further, routine
environmental matters are required to be reported quarterly. If
necessary, we engage outside consultants to determine an
appropriate course of action and estimate the likely financial
exposure presented by the environmental matter. We routinely
audit our properties to determine whether remediation is
required, the adequacy of accruals for such remediation, the
status of remedial activities and whether improvements to the
site are required to meet current and future permit or other
requirements under the environmental laws. Our program also
includes an environmental recognition award program, an
environmental report and implementation of Lafarge Groups
voluntary environmental partnership with the World Wildlife Fund
focusing on biodiversity, indicators to measure continuing
environmental improvement and a CO2 reduction commitment.

Currently, we are involved in one Superfund remediation. At this
site, which the EPA has listed on the National Priority List,
some of the potentially responsible parties named by the EPA
have initiated a third-party action against 47 parties,
including us. We also have been named a potentially responsible
party for this site. The suit alleges that in 1969 one of our
predecessor companies sold equipment containing hazardous
substances that may now be present at the site. It appears that
the largest disposer of hazardous substances at this new site is
the U.S. Department of Defense. We understand that the
Department of Defense has accepted a substantial share of
responsibility for the sites remediation and is pursuing a
remediation plan with the EPA. The suit has otherwise been
dormant for several years. We believe that this matter will not
have a material impact on our financial condition.

We record environmental accruals when it is probable that a
reasonably estimable liability has been incurred. Environmental
remediation accruals are based on internal studies and
estimates, including shared financial liability with third
parties. Accruals are adjusted when further information or
additional studies warrant. Environmental accruals are
undiscounted estimates of required remediation costs without
offset of potential insurance or other claims. When such
recoveries become probable, those amounts are reflected as
receivables in the financial statements, and are not netted
against the accruals. Recorded environmental liabilities are not
material to us. While we believe the possibility of incurring
material environmental liability in excess of recorded amounts
is remote, we may incur environmental costs in excess of amounts
recorded at December 31, 2001.

Environmental expenditures that extend the life, increase the
capacity, improve the safety or efficiency of assets or are
incurred to mitigate or prevent future environmental
contamination may be capitalized. Other environmental costs are
expensed when incurred. For the years ended December 31, 2001,
2000 and 1999, our environmental capital expenditures and
remediation expenses were not material. However, our
environmental expenditures have increased and are likely to
increase in the future. Currently, proposed changes or new
environmental laws or regulations include: promulgation of
revised EPA Boiler and Industrial Furnaces regulations under
RCRA and the maximum achievable control technology provision of
the Clean Air Act; promulgation of new cement kiln dust
management standards under RCRA and/or implementation under
state solid waste laws and regulations; promulgation of final
Clean Air Act maximum achievable control

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2


MANAGEMENTS DISCUSSION OF CASH FLOWS

The Consolidated Statements of Cash Flows summarize our main
sources and uses of cash. These statements show the relationship
between the operations presented in the Consolidated Statements
of Income and liquidity and financial resources depicted in the
Consolidated Balance Sheets.

Our liquidity requirements arise primarily from the funding of
our capital expenditures, working capital needs, debt service
obligations and dividends. We usually meet our operating
liquidity needs through internal generation of cash except in
the event of significant acquisitions. Short-term borrowings are
generally used to fund seasonal operating requirements,
particularly in the first two calendar quarters.

Cash Flows from Operations

The net cash provided by operations for each of the three years
presented reflects our net income adjusted for non-cash items.
The changes in working capital are discussed in
Managements Discussion of Financial Position.

Depreciation, depletion and amortization in 2001 increased
$25.9 million due to increases from capital expenditures
and acquisitions. Depreciation, depletion and amortization in
2000 remained at 1999 levels as increases from capital
expenditures and acquisitions were offset by lower depreciation
expense in our construction materials business. Gains on sale of
assets increased $11.3 million in 2001 due to the disposal
of our joint venture interest in Centennial Concrete Pipe &
Products and non-strategic ready-mixed concrete businesses in
Milwaukee, Wisconsin.

Cash Flows from Investing

Capital expenditures decreased $98.5 million in 2001
largely because ongoing development projects, such as the
construction of the Silver Grove, Kentucky and Palatka, Florida
gypsum drywall plants, were completed in 2000 or early 2001.
Capital expenditures are expected to total approximately $350
million to $400 million in 2002. We intend to invest in
projects that maintain or improve the performance of our plants
as well as in acquisition opportunities that we believe will
enhance our competitive position in the U.S. and Canada. In
2002, we expect to spend approximately $43 million on slag
production and grinding operations in Chicago, $30 million
on the Sugar Creek, Missouri cement plant, $16 million on a
deep water import terminal in Louisiana and $8 million on
the optimization of our Joppa, Illinois cement plant. Spending
on acquisitions decreased $161.4 million from the
relatively high level in 2000 due to the merger with the Warren
Paving & Materials Group in late December 2000 and the
acquisition of the Presque Isle quarry in June 2000. Redemptions
of short-term investments, net, decreased $114.9 million
from 2000 due to selling short-term investments in the prior
year to finance the merger with the Warren Paving &
Materials Group. Proceeds from

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Capital expenditures increased in 2000 from 1999 due largely to
ongoing development projects such as the construction of the
Silver Grove, Kentucky and Palatka, Florida gypsum drywall
plants and the Sugar Creek, Missouri cement plant expansion.
Spending for acquisitions in 2000 increased from 1999 due to the
merger with the Warren Paving & Materials Group late in
December and the acquisition of the Presque Isle quarry in June
2000. Proceeds from the sale of non-strategic assets, surplus
land and other miscellaneous items, including the disposition
late in 1999 of asphalt and paving operations in Maryland,
totaled $29.1 million for 2000 and $45.9 million for
1999.

Cash Flows from Financing

In 2001, net cash consumed by financing was $42.9 million
compared to net cash provided from financing of
$61.1 million in 2000. This change resulted from a decrease
in short-term borrowings, partially offset by a decrease in the
repurchase of common stock (see Common Equity
Interests in the Notes to Consolidated Financial
Statements concerning the buyback program of common stock).

We have access to a wide variety of short-term and long-term
financing alternatives in both the U.S. and Canada and have a
syndicated, committed, five-year revolving credit facility with
nine participants totaling $300 million. At December 31,
2001 and 2000, no amounts were outstanding under these credit
facilities.

During 2000, we entered into a receivables securitization
program to provide a cost-effective source of working capital
and short-term financing. Under the program, we agreed to
transfer, on a revolving basis, an undivided percentage
ownership interest in a designated pool of accounts receivable
to unrelated third-party purchasers up to a maximum of
$200 million. Under the agreements, new receivables are
added to the pool as collections reduce previously sold
receivables. We continue to service, administer and collect the
receivables sold, which as of December 31, 2001 and 2000,
totaled $116.5 million and $146.0 million, respectively.
Since this program is accounted for as a sale of receivables,
the related cash flows are included in net cash provided by
operations.

MANAGEMENTS DISCUSSION OF FINANCIAL POSITION

The Consolidated Balance Sheets summarize our financial position
at December 31, 2001 and 2000.

We are exposed to foreign currency exchange rate risk inherent
in our Canadian revenues, expenses, assets and liabilities
denominated in Canadian dollars, as well as interest rate risk
inherent in our debt. As more fully described in the Notes to
Consolidated Financial Statements, we primarily use fixed-rate
debt instruments to reduce the risk of exposure to changes in
interest rates and have used forward treasury lock agreements in
the past to hedge interest rate changes on anticipated debt
issuances. The value reported for Canadian dollar denominated
net assets decreased from December 31, 2000 as a result of
a decline in the value of the Canadian dollar relative to the
U.S. dollar. At December 31, 2001, the U.S. dollar
equivalent of a Canadian dollar was $0.63 versus $0.67 at
December 31, 2000. Based on 2001 results, if the value of
the Canadian dollar relative to the U.S. dollar changed by
10 percent, our consolidated net assets would change by
approximately four percent and net income would change by
approximately six percent. Liquidity is not materially impacted,
however, since Canadian earnings are considered to be
permanently invested in Canada.

Working capital, excluding cash, short-term investments, current
portion of long-term debt and the impact of exchange rate
changes ($15.5 million), increased $2.4 million from
December 31, 2000 to December 31, 2001. Accounts
receivable, excluding an exchange rate impact of $15.9 million,
increased $125.9 million primarily due to increased sales
in the fourth quarter, recent acquisitions and a decrease in
receivables sold under our securitization program. Inventories
decreased $11.7 million, excluding the exchange rate impact
of $9.9 million, due to increased levels of sales in the
fourth quarter. The increase of $65.4 million in accounts
payable and accrued liabilities, excluding the exchange rate
impact of $11.9 million, resulted mainly from our growth
and an increase in amounts payable under our receivable sales
agreement to settle a

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Net property, plant and equipment increased $117.9 million
during 2001, excluding the exchange rate impact of
$45.2 million, primarily due to acquisitions and the
expansion of the Sugar Creek, Missouri cement plant and the
construction of slag production and grinding operations in
Chicago. Capital expenditures and acquisitions of fixed assets
totaled $413.8 million in 2001. Goodwill relates primarily
to the Redland, Warren and Presque Isle transactions. Our
capitalization is summarized in the following table:

|                                                   |                      |             |      |       |   |  |      |       |  
|-------------------------------------------------- | -------------------- | ----------- | ---- | ----- | - |  | ---- | ----- | -
|                                                   |                      |            
|                                                   |                      | December 31
|                                                   |                      |            
|                                                   |                      | 2001        |      | 2000 
|                                                   |                      |             |      |      
|Long-term debt                                     |                      |             | 20.6 | %     |   |  | 21.7 | %    
|                                                  
|                                                  
|                                                  
|                                                  
|Other long-term liabilities and minority interests |                      |             | 18.5 | %     |   |  | 18.4 | %    
|                                                  
|                                                  
|                                                  
|                                                  
|Shareholders equity                               |                      |             | 60.9 | %     |   |  | 59.9 | %    
|                                                   |                      |             |      |       |   |  |      |      
|                                                   | Total capitalization |             |      | 100.0 | % |  |      | 100.0 | %
|                                                   |                      |             |      |       |   |  |      |      

The increase in shareholders equity as a percentage of
total capitalization is discussed in Managements
Discussion of Shareholders Equity.

MANAGEMENTS DISCUSSION OF SHAREHOLDERS EQUITY

The Consolidated Statements of Shareholders Equity
summarize the activity in each component of shareholders
equity for the three years presented. In 2001,
shareholders equity increased by $104.9 million,
mainly from net income of $234.1 million and the exercise
of stock options for $16.3 million. These were partially
offset by dividend payments, net of reinvestments, of $39.8
million, a change in the foreign currency translation adjustment
of $65.7 million (resulting from a six percent decrease in the
value of the Canadian dollar relative to the U.S. dollar), share
repurchases of $29.0 million and the recognition of a
$13.2 million minimum pension liability, net of income
taxes.

In 2000, shareholders equity increased by
$169.3 million, mainly from net income of
$257.4 million and the issuance of a common stock warrant
for $14.4 million. These were partially offset by dividend
payments, net of reinvestments, of $18.7 million, a change
in the foreign currency translation adjustment of
$37.1 million (resulting from a four percent decrease in
the value of the Canadian dollar relative to the U.S. dollar)
and share repurchases of $49.9 million.

Common equity interests include our $1.00 par value per share
Common Stock and the Lafarge Canada Inc. Exchangeable Preference
Shares, which are exchangeable into our Common Stock and have
comparable voting, dividend and liquidation rights. Our Common
Stock is traded on the New York and Toronto Stock Exchanges
under the ticker symbol LAF and the Exchangeable
Preference shares on the Toronto Stock Exchange under the ticker
symbol LCI.PR.E.

The following table reflects the range of high and low closing
prices of Common Stock by quarter for 2001 and 2000 as quoted on
the New York Stock Exchange:

|                  |      |                |   |        |  |        |   |        |  |  |   |       |  |  |   |       | 
|----------------- | ---- | -------------- | - | ------ |  | ------ | - | ------ |  |  | - | ----- |  |  | - | ----- | 
|                  |      |               
|                  |      | Quarters Ended
|                  |      |               
|                  |      | Mar 31         |   | Jun 30 |  | Sep 30 |   | Dec 31
|                  |      |                |   |        |  |        |   |       
|2001 Stock Prices |      |                |   |        |  |        |   |        |  |  |   |       |  |  |   |      
|                 
|                 
|                 
|                 
|                  | High |                | $ | 32.90  |  |        | $ | 34.87  |  |  | $ | 37.75 |  |  | $ | 39.00 | 
|                 
|                 
|                 
|                 
|                  | Low  |                |   | 22.69  |  |        |   | 29.00  |  |  |   | 31.98 |  |  |   | 33.74 | 
|2000 Stock Prices |      |                |   |        |  |        |   |        |  |  |   |       |  |  |   |      
|                 
|                 
|                 
|                 
|                  | High |                | $ | 27.75  |  |        | $ | 31.81  |  |  | $ | 26.13 |  |  | $ | 23.63 | 
|                 
|                 
|                 
|                 
|                  | Low  |                |   | 19.25  |  |        |   | 21.00  |  |  |   | 20.75 |  |  |   | 16.75 | 

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Dividends are summarized in the following table (in thousands,
except per share amounts):

|                                  |  |                         |        |      |  |      |         |   |  |   |         |  
|--------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                  |  |                        
|                                  |  | Years Ended December 31
|                                  |  |                        
|                                  |  | 2001                    |        | 2000 |  | 1999
|                                  |  |                         |        |      |  |     
|Common equity dividends           |  | $                       | 43,290 |      |  | $    | 43,986  |   |  | $ | 43,696  |  
|                                 
|                                 
|                                 
|                                 
|Less dividend reinvestments       |  |                         | (3,527 | )    |  |      | (25,324 | ) |  |   | (19,474 | )
|                                  |  |                         |        |      |  |      |         |   |  |   |         |  
|Net cash dividend payments        |  |                         | 39,763 |      |  | $    | 18,662  |   |  | $ | 24,222  |  
|                                  |  |                         |        |      |  |      |         |   |  |   |         |  
|Common equity dividends per share |  | $                       | 0.60   |      |  | $    | 0.60    |   |  | $ | 0.60    |  
|                                  |  |                         |        |      |  |      |         |   |  |   |         |  

There have been no changes in the dividend rate since October
1998.

MANAGEMENTS DISCUSSION OF SELECTED CONSOLIDATED
FINANCIAL DATA

The Selected Consolidated Financial Data highlights certain
significant trends in our financial condition and results of
operations.

Net sales in 1998 increased by 36 percent primarily due to
the addition of the Redland operations as well as increased
shipments and prices. In 1999, net sales increased by eight
percent primarily due to favorable economic conditions
supporting demand in most segments and increased average selling
prices. In 2000, net sales increased by two percent due to
acquisitions throughout our operations and improving economic
conditions. In 2001, net sales increased by 19 percent
mainly due to recent acquisitions, increased volumes from our
heritage operations as well as increased average selling prices
for ready-mixed concrete and aggregate and Canadian cement.
These were partially offset by reduced average selling prices
for cement in the U.S. and gypsum drywall. See Managements
Discussion of Income for additional details.

Inflation rates in recent years have not been a significant
factor in our net sales or earnings growth. We continually
attempt to offset the effect of inflation by improving operating
efficiencies, especially in the areas of selling and
administrative expenses, productivity and energy costs. We
compete with other suppliers of our products in all of our
markets. The ability to recover increasing costs by obtaining
higher prices for our products varies with the level of activity
in the construction industry, the number, size and strength of
competitors and the availability of products to supply a local
market.

Net cash provided by operations consists of net income adjusted
primarily for depreciation and changes in operating working
capital. We are in a capital-intensive industry and, as a
result, we recognize large amounts of depreciation. We have used
our cash provided by operations to expand our markets, improve
the performance of our plants and other operating equipment, and
for the years prior to the Redland acquisition, to reduce debt.

Capital expenditures and acquisitions, excluding the Redland
assets that were acquired for $690 million in 1998 but were
accounted for similar to a pooling of interests, totaled
$1,917.9 million over the past five years, which included:
the construction of new drywall plants in Kentucky and Florida;
acquisition of a cement plant and related limestone quarry;
cement plant projects to increase production capacity and reduce
costs including the new Richmond, British Columbia cement plant
and the Sugar Creek, Missouri cement plant; the installation of
receiving and handling facilities for substitute fuels and raw
materials; the building and purchasing of additional
distribution terminals and water transportation facilities to
extend markets and improve existing supply networks; the
expansion of our cement-related products operations; the
expansion of asphalt, paving and aggregate operations through
the merger with the Warren Paving & Materials Group; the
acquisition of ready-mixed concrete plants and aggregate
operations, including our acquisition of the Presque Isle
quarry, Rocky Mountain Materials, Pine Hill Materials Corp.,
American Readi-Mix Concrete Corporation and several other small
tuck-in acquisitions; and the renewal of the construction
materials mobile equipment fleet.

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Item 7A.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

We are exposed to commodity price, interest rate and foreign
currency risks. We have defined strict policies and procedures
to measure, manage and monitor our market risk exposures. Our
policies do not permit any speculative market position. We have
instituted management rules based on a segregation of
operations, financial and administrative control, and risk
measurement.

We use financial instruments only to hedge existing or
anticipated financial and commercial exposures. We undertake
this hedging in the over-the-counter market with a limited
number of highly rated counterparts. Our positions in derivative
financial instruments are monitored using various techniques,
including the fair value approach.

Commodity Price Risk

We are subject to commodity risk with respect to price changes
principally in the coal, coke, natural gas, electricity and
diesel fuel. We attempt to limit our exposure to changes in
commodity prices by entering into long-term contracts and
increasing our use of alternative fuels. We occasionally use
commodity-based derivatives to manage our exposure to commodity
price fluctuations. We execute these commodity-based derivatives
for the purpose of hedging the economic exposure to commodity
price changes, not for trading or speculative purposes.

By using derivative financial instruments to hedge exposures to
changes in commodity prices, we expose ourself to credit risk
and market risk. Credit risk is the failure of the counterparty
to perform under the terms of the derivative contract. When the
fair value of a derivative contract is positive, the
counterparty owes us, which creates credit risk for us. When the
fair value of a derivative contract is negative, we owe the
counterparty and, therefore, it does not possess credit risk. We
minimize the credit risk in derivative instruments by entering
into transactions only with high-quality counterparties.

Market risk is the adverse effect on the value of a financial
instrument that results from a change in commodity prices. This
market risk is managed by establishing and monitoring parameters
that limit the types and degree of market risk that may be
undertaken. As such, a 10 percent change in the commodity
prices for hedged items would cause a change on the
December 31, 2001 consolidated net assets and the 2001
consolidated net income by less than $1 million, net of any
other impact.

Foreign Currency Risk

Translation Risks  The assets, liabilities,
income and expenses of our Canadian operating entities are
denominated in a foreign currency. Our financial statements are
presented in U.S. dollars. Thus, assets, liabilities, income and
expenses denominated in currencies other than the U.S. dollars
must be translated into U.S. dollars at the applicable exchange
rate to be included in our financial statements.

If the U.S. dollar increases in value against the Canadian
dollar, the value in U.S. dollars of assets, liabilities, income
and expenses originally recorded in the Canadian dollar will
decrease. Conversely, if the U.S. dollar decreases in value
against the Canadian dollar, the value in U.S. dollars of
assets, liabilities, income and expenses originally recorded in
Canadian dollars will increase. Thus, increases and decreases in
the value of the U.S. dollar has a direct impact on the value in
U.S. dollars of our Canadian dollar-denominated assets,
liabilities, income and expenses, even if the value of these
items has not changed in their original currency.

At December 31, 2001 and for the year then ended,
approximately 44 percent of our consolidated net assets and
61 percent of consolidated net income was attributable to
subsidiaries that prepare their financial statements in Canadian
dollars. As such, a 10 percent change in the U.S. dollar/
Canadian dollar exchange rate would cause a change on
consolidated net assets and consolidated net income by
approximately $87 million and $14 million, net of any
other impact, respectively.

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Transaction Risks  We are subject to limited
foreign currency exchange risks as a consequence of commercial
exposures as a result of purchase and sale transactions in
currencies other than our operating currencies. Our exposure to
changes in foreign currency exchange risks related to
transactions is insignificant.

Interest Rate Risk

We are exposed to interest rate risk exposure through our debt.
In the past we have entered into interest rate forward
agreements to reduce our exposure to market risks from changing
interest rates related to anticipated debt issuances. These
contracts were terminated in 1998 when the hedged forecasted
debt was issued, and any resulting hedging gains and losses from
these contracts are reported as a component of the carrying
amount of the hedged debt and are being recognized as a yield
adjustment over the remaining debt terms. At December 31,
2001, we had no derivative instruments related to interest rates.

We assess interest rate cash flow risk by continually
identifying and monitoring changes in interest rate exposures
that may adversely impact expected future cash flows and by
evaluating hedging opportunities. We maintain risk management
control systems to monitor interest rate cash flow risk
attributable to both our outstanding or forecasted debt
obligations. The risk management control systems involve the use
of analytical techniques, including cash flow sensitivity
analysis, to estimate the expected impact of changes in interest
rates on our future cash flows.

Our interest rate exposure can be subdivided into the following
risks:

Price risk for fixed-rate financial assets and
liabilities  By contracting a fixed-rate
liability, for example, we are exposed to an opportunity cost in
the event of a fall in interest rates. Changes in interest rates
impact the market value of fixed-rate assets and liabilities,
leaving the associated financial income or expense unchanged.

At December 31, 2001, 72 percent of our consolidated
indebtedness was at fixed rates. For a further discussion of our
financial policy and interest rate exposure, see the
Debt note of the Notes to Consolidated Financial
Statements reported in Item 8 of Part II of the Annual
Report, which is incorporated herein by reference.

Cash-flow risk for floating rate assets and
liabilities  Changes in interest rates have
little impact on the market value of floating-rate assets and
liabilities, but directly influence our future income or expense
flows.

We use variable-rate debt to finance our operations. At
December 31, 2001, approximately 28 percent of our
consolidated indebtedness was at variable rates, which expose us
to variability in interest payments due to changes in interest
rates. As such, a one percent change in the average interest
rate would cause a change on 2001 consolidated net income of
approximately $2 million, net of any other impact.

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Item 8.  FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULE


|                                   |                                                                                                                     |      |  |    | 
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
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|Financial Report:                  |                                                                                                                     |      |  |   
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	Andersen LLP                                                      |      |  | 52 | 
|                                  
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|Consolidated Financial Statements: |                                                                                                                     |      |  |   
|                                  
|                                  
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|                                   | Consolidated Balance Sheets as of
	December 31, 2001 and 2000                                                       |      |  | 53 | 
|                                  
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|                                   | Consolidated Statements of Income for the Years
	Ended December 31, 2001, 2000 and 1999                             |      |  | 54 | 
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|                                   | Consolidated Statements of Shareholders
	Equity for the Years Ended December 31, 2001, 2000 and 1999               |      |  | 55 | 
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|                                  
|                                   | Consolidated Statements of Comprehensive Income
	for the Years Ended December 31, 2001, 2000 and 1999               |      |  | 56 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999                         |      |  | 57 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Notes to Consolidated Financial Statements                                                                          |      |  | 58 | 
|                                  
|                                  
|                                  
|                                  
|                                  
|Financial Statement Schedule:      |                                                                                                                     |      |  |   
|                                  
|                                  
|                                  
|                                  
|                                   | Schedule II  Consolidated
	Valuation and Qualifying Accounts for the Years Ended
	December 31, 2001, 2000 and 1999 |      |  | 85 | 
|                                  
|                                   | All other schedules are omitted because they are
	not applicable.                                                   |      |  |    | 

51



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Lafarge North America Inc.:

We have audited the accompanying consolidated balance sheets of
Lafarge North America Inc.(formerly Lafarge Corporation) (a
Maryland corporation) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of
income, shareholders equity, comprehensive income and cash
flows for each of the three years in the period ended
December 31, 2001. These financial statements are the
responsibility of the companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Lafarge North America Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule II in
this Item 8 of Part II of the Annual Report is presented
for purposes of complying with the Securities and Exchange
Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



| |                    
| | -------------------
| | ARTHUR ANDERSEN LLP



|                 | 
|---------------- | 
|Vienna, Virginia | 
|January 22, 2002 | 

52



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |           |           | 
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                             |                                                                                                                                 |                                            
|                                                             |                                                                                                                                 | December 31                                
|                                                             |                                                                                                                                 |                                            
|                                                             |                                                                                                                                 | 2001                                        |           | 2000     
|                                                             |                                                                                                                                 |                                             |           |          
|Assets                                                       |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents                                    |                                                                                                                                 | $                                           | 202,446   |           |           | $ | 214,089   |          
|                                                            
|                                                            
|                                                            
|                                                            
|Short-term investments                                       |                                                                                                                                 |                                             | 23,264    |           |           |   |          |          
|                                                            
|                                                            
|                                                            
|                                                            
|Receivables, net                                             |                                                                                                                                 |                                             | 495,956   |           |           |   | 385,912   |          
|                                                            
|                                                            
|                                                            
|                                                            
|Inventories                                                  |                                                                                                                                 |                                             | 350,860   |           |           |   | 372,423   |          
|                                                            
|                                                            
|                                                            
|                                                            
|Deferred tax assets                                          |                                                                                                                                 |                                             | 54,224    |           |           |   | 45,014    |          
|                                                            
|                                                            
|                                                            
|                                                            
|Other current assets                                         |                                                                                                                                 |                                             | 57,258    |           |           |   | 59,147    |          
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                             |                                                                                                                                 | Total current assets                        |           |           | 1,184,008 |   |           |           | 1,076,585 | 
|                                                            
|                                                            
|                                                            
|                                                            
|Property, plant and equipment, net                           |                                                                                                                                 |                                             | 2,195,114 |           |           |   | 2,122,390 |          
|                                                            
|                                                            
|                                                            
|                                                            
|Goodwill, net                                                |                                                                                                                                 |                                             | 474,401   |           |           |   | 438,345   |          
|                                                            
|                                                            
|                                                            
|                                                            
|Other assets                                                 |                                                                                                                                 |                                             | 264,078   |           |           |   | 265,264   |          
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                             |                                                                                                                                 | Total Assets                                |           | $         | 4,117,601 |   |           | $         | 3,902,584 | 
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|Liabilities and Shareholders
	Equity                        |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                            
|                                                            
|                                                            
|                                                            
|Accounts payable and accrued liabilities                     |                                                                                                                                 | $                                           | 555,496   |           |           | $ | 502,030   |          
|                                                            
|                                                            
|                                                            
|                                                            
|Income taxes payable                                         |                                                                                                                                 |                                             | 72,640    |           |           |   | 48,199    |          
|                                                            
|                                                            
|                                                            
|                                                            
|Short-term borrowings and current portion of
	long-term debt |                                                                                                                                 |                                             | 210,447   |           |           |   | 190,250   |          
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                             |                                                                                                                                 | Total current liabilities                   |           |           | 838,583   |   |           |           | 740,479   | 
|                                                            
|                                                            
|                                                            
|                                                            
|Long-term debt                                               |                                                                                                                                 |                                             | 674,616   |           |           |   | 687,448   |          
|                                                            
|                                                            
|                                                            
|                                                            
|Minority interests                                           |                                                                                                                                 |                                             | 109,604   |           |           |   | 117,010   |          
|                                                            
|                                                            
|                                                            
|                                                            
|Other long-term liabilities                                  |                                                                                                                                 |                                             | 497,737   |           |           |   | 465,478   |          
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                             |                                                                                                                                 | Total Liabilities                           |           |           | 2,120,540 |   |           |           | 2,010,415 | 
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|Shareholders Equity:                                        |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Common stock ($1.00 par value; authorized 150.0
	million shares; issued 67.9 and 67.5 million shares,
	respectively)            |                                             |           | 67,890    |           |   |           | 67,492    |          
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Exchangeable shares (no par or stated value;
	authorized 24.3 million shares; issued 4.2 and 4.5 million
	shares, respectively) |                                             |           | 32,375    |           |   |           | 34,402    |          
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Additional paid-in capital                                                                                                      |                                             |           | 684,700   |           |   |           | 690,072   |          
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Retained earnings                                                                                                               |                                             |           | 1,427,917 |           |   |           | 1,237,117 |          
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Accumulated other comprehensive loss                                                                                            |                                             |           | (215,821  | )         |   |           | (136,914  | )        
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                             |                                                                                                                                 | Total Shareholders Equity                  |           |           | 1,997,061 |   |           |           | 1,892,169 | 
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          
|                                                             |                                                                                                                                 | Total Liabilities and Shareholders
	Equity |           | $         | 4,117,601 |   |           | $         | 3,902,584 | 
|                                                             |                                                                                                                                 |                                             |           |           |           |   |           |          

See the Notes to Consolidated Financial Statements.

53



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME



|                             |                            |                          |           |           |           |      |           |           |           |   |           |           |           | 
|---------------------------- | -------------------------- | ------------------------ | --------- | --------- | --------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                             |                            |                         
|                             |                            | Years Ended December 31 
|                             |                            |                         
|                             |                            | 2001                     |           | 2000      |           | 1999
|                             |                            |                          |           |           |           |     
|Net Sales                    |                            | $                        | 3,323,020 |           |           | $    | 2,787,629 |           |           | $ | 2,721,637 |          
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          
|Costs and expenses:          |                            |                          |           |           |           |      |           |           |           |   |           |          
|                            
|                            
|                            
|                            
|                             | Cost of goods sold         |                          |           | 2,606,681 |           |      |           | 2,099,332 |           |   |           | 1,996,321 |          
|                            
|                            
|                            
|                            
|                             | Selling and administrative |                          |           | 296,091   |           |      |           | 269,368   |           |   |           | 235,027   |          
|                            
|                            
|                            
|                            
|                             | Amortization of goodwill   |                          |           | 20,641    |           |      |           | 17,213    |           |   |           | 17,164    |          
|                            
|                            
|                            
|                            
|                             | Other income, net          |                          |           | (1,448    | )         |      |           | (29,036   | )         |   |           | (8,492    | )        
|                            
|                            
|                            
|                            
|                             | Minority interests         |                          |           | 7,007     |           |      |           |          |           |   |           |          |          
|                            
|                            
|                            
|                            
|                             | Interest expense           |                          |           | 54,507    |           |      |           | 50,620    |           |   |           | 62,736    |          
|                            
|                            
|                            
|                            
|                             | Interest income            |                          |           | (6,615    | )         |      |           | (23,697   | )         |   |           | (17,905   | )        
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          
|                             |                            | Total costs and expenses |           |           | 2,976,864 |      |           |           | 2,383,800 |   |           |           | 2,284,851 | 
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          
|Earnings before income taxes |                            |                          | 346,156   |           |           |      | 403,829   |           |           |   | 436,786   |          
|                            
|                            
|                            
|                            
|Income taxes                 |                            |                          | 112,066   |           |           |      | 146,462   |           |           |   | 161,412   |          
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          
|Net Income                   |                            | $                        | 234,090   |           |           | $    | 257,367   |           |           | $ | 275,374   |          
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          
|Net Income Per Share-Basic   |                            | $                        | 3.25      |           |           | $    | 3.51      |           |           | $ | 3.79      |          
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          
|Net Income Per Share-Diluted |                            | $                        | 3.21      |           |           | $    | 3.51      |           |           | $ | 3.77      |          
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          
|Dividends Per Share          |                            | $                        | 0.60      |           |           | $    | 0.60      |           |           | $ | 0.60      |          
|                             |                            |                          |           |           |           |      |           |           |           |   |           |          

See the Notes to Consolidated Financial Statements.

54



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY



|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  |  |        |     | 
|------------------------------------ | ---------------------------------------------------------- | --------------------------------- | ---------------------------- | --------- | ------ | ------ |  | ------ | ------ | ------ | --------- | --------- | ------ | ------ |  |  | ------ | ----- | --------- | --------- | ------ | ------ |  |  | ------ | --- | 
|                                     |                                                            |                                  
|                                     |                                                            | Years Ended December 31          
|                                     |                                                            |                                  
|                                     |                                                            |                                   |                              |           |        |       
|                                     |                                                            | 2001                              |                              | 2000      |        | 1999  
|                                     |                                                            |                                   |                              |           |        |       
|                                     |                                                            | Amount                            |                              | Shares    |        | Amount |  | Shares |        | Amount |           | Shares   
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |          
|Common Stock                         |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Balance at January 1              |                              | $         | 67,492 |        |  |        | 67,492 |        |           | $         | 68,686 |        |  |  | 68,686 |       |           | $         | 67,370 |        |  |  | 67,370 |    
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Share repurchases                 |                              |           | (905   | )      |  |        | (905   | )      |           |           | (2,469 | )      |  |  | (2,469 | )     |           |           |       |        |  |  |       |    
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Issuance of shares for:           |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  |  |        |    
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            |                                   | Dividend reinvestment plans  |           |        | 99     |  |        |        | 99     |           |           |        | 1,173  |  |  |        | 1,173 |           |           |        | 677    |  |  |        | 677 | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            |                                   | Employee stock purchase plan |           |        | 66     |  |        |        | 66     |           |           |        | 61     |  |  |        | 61    |           |           |        | 47     |  |  |        | 47  | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Conversion of exchangeable shares |                              |           | 337    |        |  |        | 337    |        |           |           | 13     |        |  |  | 13     |       |           |           | 502    |        |  |  | 502    |    
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Exercise of stock options         |                              |           | 801    |        |  |        | 801    |        |           |           | 28     |        |  |  | 28     |       |           |           | 90     |        |  |  | 90     |    
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                     |                                                            | Balance at December 31            |                              | $         | 67,890 |        |  |        | 67,890 |        |           | $         | 67,492 |        |  |  | 67,492 |       |           | $         | 68,686 |        |  |  | 68,686 |    
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                     | Exchangeable Shares                                        |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Balance at January 1              |                              | $         | 34,402 |        |  |        | 4,523  |        |           | $         | 32,957 |        |  |  | 4,472  |       |           | $         | 35,814 |        |  |  | 4,936  |    
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Issuance of shares for:           |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  |  |        |    
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            |                                   | Dividend reinvestment plan   |           |        | 333    |  |        |        | 10     |           |           |        | 699    |  |  |        | 31    |           |           |        | 505    |  |  |        | 17  | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            |                                   | Employee stock purchase plan |           |        |       |  |        |        |       |           |           |        | 837    |  |  |        | 33    |           |           |        | 147    |  |  |        | 21  | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            | Conversion of exchangeable shares |                              |           | (2,360 | )      |  |        | (337   | )      |           |           | (91    | )      |  |  | (13    | )     |           |           | (3,509 | )      |  |  | (502   | )  
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                     |                                                            | Balance at December 31            |                              | $         | 32,375 |        |  |        | 4,196  |        |           | $         | 34,402 |        |  |  | 4,523  |       |           | $         | 32,957 |        |  |  | 4,472  |    
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|Additional Paid-In Capital           |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Balance at January 1                                       |                                   | $                            | 690,072   |        |        |  |        |        |        | $         | 697,324   |        |        |  |  |        |       | $         | 672,555   |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Share repurchases                                          |                                   |                              | (28,065   | )      |        |  |        |        |        |           | (47,407   | )      |        |  |  |        |       |           |          |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Issuance of shares for:                                    |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            |                                   | Dividend reinvestment plans  |           |        | 3,095  |  |        |        |        |           |           |        | 23,452 |  |  |        |       |           |           |        | 18,292 |  |  |        |     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                            |                                   | Employee stock purchase plan |           |        | 2,083  |  |        |        |        |           |           |        | 1,493  |  |  |        |       |           |           |        | 2,055  |  |  |        |     | 
|                                    
|                                    
|                                    
|                                    
|                                     | Conversion of exchangeable shares                          |                                   |                              | 2,023     |        |        |  |        |        |        |           | 78        |        |        |  |  |        |       |           | 3,007     |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Exercise of stock options                                  |                                   |                              | 15,492    |        |        |  |        |        |        |           | 696       |        |        |  |  |        |       |           | 1,415     |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Issuance of common stock warrant                           |                                   |                              |          |        |        |  |        |        |        |           | 14,436    |        |        |  |  |        |       |           |          |        |        |  |  |       
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                     | Balance at December 31                                     |                                   | $                            | 684,700   |        |        |  |        |        |        | $         | 690,072   |        |        |  |  |        |       | $         | 697,324   |        |        |  |  |       
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|Retained Earnings                    |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Balance at January 1                                       |                                   | $                            | 1,237,117 |        |        |  |        |        |        | $         | 1,023,736 |        |        |  |  |        |       | $         | 792,058   |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Net income                                                 |                                   |                              | 234,090   |        |        |  |        |        |        |           | 257,367   |        |        |  |  |        |       |           | 275,374   |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends  common equity interests                        |                                   |                              | (43,290   | )      |        |  |        |        |        |           | (43,986   | )      |        |  |  |        |       |           | (43,696   | )      |        |  |  |       
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                     | Balance at December 31                                     |                                   | $                            | 1,427,917 |        |        |  |        |        |        | $         | 1,237,117 |        |        |  |  |        |       | $         | 1,023,736 |        |        |  |  |       
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|Accumulated Other Comprehensive Loss |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Balance at January 1                                       |                                   | $                            | (136,914  | )      |        |  |        |        |        | $         | (99,819   | )      |        |  |  |        |       | $         | (152,623  | )      |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Foreign currency translation adjustments                   |                                   |                              | (65,694   | )      |        |  |        |        |        |           | (37,095   | )      |        |  |  |        |       |           | 52,804    |        |        |  |  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Minimum pension liability adjustment, net of
	income taxes |                                   |                              | (13,213   | )      |        |  |        |        |        |           |          |        |        |  |  |        |       |           |          |        |        |  |  |       
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|                                     | Balance at December 31                                     |                                   | $                            | (215,821  | )      |        |  |        |        |        | $         | (136,914  | )      |        |  |  |        |       | $         | (99,819   | )      |        |  |  |       
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 
|Total Shareholders Equity           |                                                            | $                                 | 1,997,061                    |           |        |        |  |        |        | $      | 1,892,169 |           |        |        |  |  |        | $     | 1,722,884 |           |        |        |  | 
|                                     |                                                            |                                   |                              |           |        |        |  |        |        |        |           |           |        |        |  |  |        |       |           |           |        |        |  | 

See the Notes to Consolidated Financial Statements.

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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



|                     |                                                            |                         |         |         |   |      |         |         |   |   |         |        | 
|-------------------- | ---------------------------------------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------ | 
|                     |                                                            |                        
|                     |                                                            | Years Ended December 31
|                     |                                                            |                        
|                     |                                                            | 2001                    |         | 2000    |   | 1999
|                     |                                                            |                         |         |         |   |     
|Net Income           |                                                            | $                       | 234,090 |         |   | $    | 257,367 |         |   | $ | 275,374 |       
|                    
|                    
|                    
|                    
|                     | Foreign currency translation adjustments                   |                         |         | (65,694 | ) |      |         | (37,095 | ) |   |         | 52,804 | 
|                    
|                    
|                    
|                    
|                     | Minimum pension liability adjustment, net of
	income taxes |                         |         | (13,213 | ) |      |         |        |   |   |         |       | 
|                     |                                                            |                         |         |         |   |      |         |         |   |   |         |       
|Comprehensive Income |                                                            | $                       | 155,183 |         |   | $    | 220,272 |         |   | $ | 328,178 |       
|                     |                                                            |                         |         |         |   |      |         |         |   |   |         |       

See the Notes to Consolidated Financial Statements.

56



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |          |         |  
|-------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------------------------- | -------- | -------- | ------- | ---- | -------- | -------- | ------- | - | -------- | -------- | ------- | -
|                                                         |                                                                         |                                                               
|                                                         |                                                                         | Years Ended December 31                                       
|                                                         |                                                                         |                                                               
|                                                         |                                                                         | 2001                                                           |          | 2000     |         | 1999
|                                                         |                                                                         |                                                                |          |          |         |     
|Cash Flows from Operations                               |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Net income                                                              |                                                                | $        | 234,090  |         |      | $        | 257,367  |         |   | $        | 275,374  |        
|                                                         | Adjustments to reconcile net income to net cash
	provided by operations |                                                                |          |          |         |      |          |          |         |   |          |          |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                         | Depreciation, depletion and amortization                       |          |          | 194,160 |      |          |          | 168,294 |   |          |          | 168,272 |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                         | Provision for bad debts                                        |          |          | 6,106   |      |          |          | 2,451   |   |          |          | 2,490   |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                         | Deferred income taxes                                          |          |          | 30      |      |          |          | 12,156  |   |          |          | 10,457  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                         | Gain on sale of assets                                         |          |          | (24,051 | )    |          |          | (12,769 | ) |          |          | (10,750 | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                         | Other noncash charges and credits, net                         |          |          | (11,211 | )    |          |          | (16,723 | ) |          |          | 6,507   |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                         | Net change in operating working capital (see
	Analysis below)* |          |          | 23,941  |      |          |          | 76,810  |   |          |          | (53,832 | )
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Net Cash Provided by Operations                          |                                                                         |                                                                | 423,065  |          |         |      | 487,586  |          |         |   | 398,518  |         
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Cash Flows from Investing                                |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Capital expenditures                                                    |                                                                |          | (333,170 | )       |      |          | (431,698 | )       |   |          | (315,724 | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Acquisitions, net of cash acquired                                      |                                                                |          | (80,615  | )       |      |          | (242,036 | )       |   |          | (58,268  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Redemptions (purchases) of short-term
	investments, net                 |                                                                |          | (23,264  | )       |      |          | 91,626   |         |   |          | (74,556  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Proceeds from property, plant and equipment
	dispositions               |                                                                |          | 66,163   |         |      |          | 29,083   |         |   |          | 45,939   |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other                                                                   |                                                                |          | (12,350  | )       |      |          | (10,990  | )       |   |          | 12,603   |        
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Net Cash Used for Investing                              |                                                                         |                                                                | (383,236 | )        |         |      | (564,015 | )        |         |   | (390,006 | )       
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Cash Flows from Financing                                |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Repayment of long-term debt                                             |                                                                |          | (16,340  | )       |      |          | (30,317  | )       |   |          | (31,370  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Issuance (repayment) of short-term
	borrowings, net                     |                                                                |          | 23,698   |         |      |          | 156,804  |         |   |          | (9,491   | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Issuance of equity securities                                           |                                                                |          | 18,442   |         |      |          | 3,115    |         |   |          | 3,944    |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Repurchase of common stock                                              |                                                                |          | (28,970  | )       |      |          | (49,876  | )       |   |          |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Dividends, net of reinvestments                                         |                                                                |          | (39,763  | )       |      |          | (18,662  | )       |   |          | (24,222  | )      
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Net Cash Provided (Consumed) by Financing                |                                                                         |                                                                | (42,933  | )        |         |      | 61,064   |          |         |   | (61,139  | )       
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Effect of exchange rate changes                          |                                                                         |                                                                | (8,539   | )        |         |      | (8,358   | )        |         |   | 19,301   |         
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Net Decrease in Cash and Cash Equivalents                |                                                                         |                                                                | 11,643   |          |         |      | (23,723  | )        |         |   | (33,326  | )       
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and Cash Equivalents at January 1                   |                                                                         |                                                                | 214,089  |          |         |      | 237,812  |          |         |   | 271,138  |         
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Cash and Cash Equivalents at December 31                 |                                                                         | $                                                              | 202,446  |          |         | $    | 214,089  |          |         | $ | 237,812  |         
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|*Analysis of Changes in Operating Working
	Capital Items |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Receivables, net                                                        |                                                                | $        | (144,370 | )       |      | $        | 148,562  |         |   | $        | (85,211  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Inventories                                                             |                                                                |          | 9,524    |         |      |          | (48,077  | )       |   |          | (33,842  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other current assets                                                    |                                                                |          | 9,567    |         |      |          | 746      |         |   |          | (24,554  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accounts payable and accrued liabilities                                |                                                                |          | 74,917   |         |      |          | (7,932   | )       |   |          | 46,490   |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Income taxes payable                                                    |                                                                |          | 74,303   |         |      |          | (16,489  | )       |   |          | 43,285   |        
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         
|Net Change in Operating Working
	Capital                 |                                                                         | $                                                              | 23,941   |          |         | $    | 76,810   |          |         | $ | (53,832  | )       
|                                                         |                                                                         |                                                                |          |          |         |      |          |          |         |   |          |         

See the Notes to Consolidated Financial Statements.

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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lafarge North America Inc., together with its subsidiaries
(Lafarge or the company), is North
Americas largest diversified supplier of aggregate,
concrete and concrete products, cement and cement-related
products, gypsum drywall, and other construction materials used
for residential, commercial, institutional and public works
construction. The companys business is organized into
three operating segments: Construction Materials, Cement and
Cement-Related Products, and Gypsum. Each represents a
separately managed strategic business unit with different
capital requirements and marketing strategies. For information
regarding the companys operating segments and products,
see the Segment and Related Information note herein.

Lafarge operates in the U.S. and throughout Canada, where it
operates through a major operating subsidiary, Lafarge Canada
Inc. (LCI). The primary U.S. markets are in the
northeast, midsouth, midwest, northcentral, mountain and
northwest areas. Lafarges wholly-owned subsidiary, Systech
Environmental Corporation, supplies cement plants with fuel
quality waste. Lafarge S.A., a French corporation, and certain
of its affiliates (Lafarge S.A.) own a majority of
the voting securities of Lafarge, including the companys
outstanding common stock, par value $1.00 per share (the
Common Stock), and LCIs exchangeable
preference shares (the Exchangeable Shares).

Effective July 11, 2001, the company entered into an
agreement with Lafarge S.A. to manage and operate certain U.S.
cement and construction materials businesses that Lafarge S.A.
obtained in its acquisition of U.K.-based Blue Circle Industries
PLC on that date (the Blue Circle Asset Management
Agreement). The Blue Circle Asset Management Agreement
grants the company management authority for most of Blue
Circles U.S. business and provides for a fixed annual
management fee plus incentives for improving operating results.
The management contract expires on December 31, 2002 and is
renewable for one-year periods thereafter. The assets that the
company manages, which remain the property of Lafarge S.A. and
which financial results there from are not consolidated as part
of Lafarge North America Inc., include five full-production
cement plants; a slag grinding facility; 11 cement terminals; 13
pits and quarries for producing aggregate (crushed stone, sand
and gravel); 61 ready-mixed concrete plants and several concrete
block operations. A majority of the operations are situated in
the U.S. southeast. Further, in conjunction with the Blue Circle
Asset Management Agreement, Lafarge S.A. granted the company an
option to purchase the assets being managed, anytime between
July 1, 2002 and December 31, 2004, at a fixed price
of $1.4 billion, subject to certain adjustments at the time
of the exercise.

On September 1, 2001, the company changed its name from
Lafarge Corporation to Lafarge North America Inc.

Accounting and Financial Reporting Policies

Estimates

The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses.
Actual results may differ from these estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of
Lafarge and all of its wholly and majority-owned subsidiaries,
after the elimination of intercompany balances and transactions.
Investments in affiliates in which the company has less than a
majority ownership are accounted for by the equity method and
included in other assets in the Consolidated Balance
Sheets. Certain reclassifications have been made to prior years
to conform to the 2001 presentation.

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Foreign Currency Translation

The company uses the U.S. dollar as its functional currency for
operations in the U.S. and the Canadian dollar for LCI. The
assets and liabilities of LCI are translated at the exchange
rate prevailing at the balance sheet date. Related revenue and
expense accounts for this subsidiary are translated using the
average exchange rate during the year. Foreign currency
translation adjustments of $202,608 and $136,914 at
December 31, 2001 and 2000, respectively, are included in
accumulated other comprehensive loss in the
Consolidated Balance Sheets and in the Consolidated Statements
of Shareholders Equity.

Cash and Cash Equivalents

The company considers liquid investments purchased with an
original maturity of three months or less to be cash
equivalents. Because of the short maturity, their carrying
amounts approximate fair value.

Short-Term Investments

Short-term investments consist primarily of commercial paper
with original maturities beyond three months and fewer than
12 months. Such short-term investments are carried at cost,
which approximates fair value due to the short period of time to
maturity.

Derivative Instruments and Hedging
Activities

In June 1998, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Certain Hedging Activities. In
June 1999, FASB issued SFAS No. 137, Accounting
Derivative Instruments and Hedging Activities  Deferral of
the Effective Date of FASB Statement No. 133, which
deferred the effective date of SFAS No. 133. In June 2000,
FASB issued SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an
Amendment of SFAS 133. SFAS No. 133, SFAS
No. 137 and SFAS No. 138 (collectively referred to as
SFAS No. 133) require that all derivative
instruments be recorded on the balance sheet at their respective
fair values. The company adopted SFAS No. 133 on
January 1, 2001. The adoption of SFAS No. 133 did not
materially impact the companys consolidated results of
operations or financial condition.

To the extent possible, the company will elect to apply the
normal purchases or sales exception in accordance with SFAS
No. 133. Normal purchases and normal sales are contracts
that provide for the purchase or sale of something other than a
financial instrument or derivative instrument that will be
delivered in quantities expected to be used or sold by the
company over a reasonable period in the normal course of
business. Often this exception will apply to purchases of
commodities used in the companys production process that
would otherwise be considered derivative instruments. When
applied, this exception allows the company to not recognize
these derivatives on the balance sheet at their fair value.

When the normal purchases or sales exception is not applied, the
derivatives are recognized on the balance sheet at their fair
value. The company may execute derivatives for purposes of
hedging various commodity price and financial exposures. For
those derivatives that qualify for hedge accounting, on the date
the derivative contract is entered into the company designates
the derivative and documents the hedge relationship as either a
fair value or cash flow hedge in accordance with the
requirements of SFAS No. 133. The company formally
documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and
strategy for undertaking various hedge transactions. This
process includes linking all derivatives that are designated as
fair value, cash flow or foreign currency hedges to specific
assets and liabilities on the balance sheet or to specific firm
commitments or forecasted transactions. The company also
formally assesses, both at the hedge relationships
inception and on an ongoing basis, whether the derivatives that
are used in hedging transactions are highly effective in
offsetting changes in fair values or cash

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

flows of hedged items. When it is determined that a derivative
is not highly effective as a hedge or that it has ceased to be a
highly effective hedge, the company discontinues hedge
accounting prospectively. The company will only apply hedge
accounting to those relationships that have been properly
designated and documented and are anticipated to be highly
effective.

Classification of a change in a derivatives fair value is
determined by whether the derivative is designated in a
qualifying hedge relationship. For a derivative in a qualifying
cash flow hedge, the effective portion of the derivatives
fair value change is reported as a component of
accumulated other comprehensive income (loss) in the
Consolidated Balance Sheets and in the Consolidated Statements
of Shareholders Equity. For a derivative in a qualifying
fair value hedge, effective changes in the fair value are
reported in the Consolidated Statements of Income, along with
changes in the value of the hedged item for the risk being
hedged. In both fair value and cash flow hedge relationships,
any hedge ineffectiveness is reported as a component of
other income, net in the current periods
Consolidated Statement of Income.

Concentration of Credit Risk

Financial instruments that potentially subject the company to
concentrations of credit risk are primarily cash equivalents,
short-term investments and receivables. The company places its
cash equivalents and short-term investments in investment grade,
short-term debt instruments. The company performs ongoing credit
evaluations of its customers financial condition and
generally requires no collateral from its customers. The
allowances for non-collection of receivables are based upon
analysis of economic trends in the construction industry and the
expected collectibility of overall receivables.

Inventories

Inventories are valued at the lower of cost or market. The
majority of the companys U.S. cement inventories, other
than maintenance and operating supplies, are stated at last-in,
first-out (LIFO) cost and all other inventories are
valued at average cost.

Property, Plant and Equipment

Depreciation of property, plant and equipment is computed for
financial reporting purposes using the straight-line method over
the estimated useful lives of the assets. These lives range from
three years on light mobile equipment to 40 years on
certain buildings. Land and mineral deposits include depletable
raw material reserves with depletion recorded using the
units-of-production method. Repair and maintenance costs are
expensed as incurred.

Goodwill

Goodwill is amortized using the straight-line method over
periods not exceeding 40 years. The company continually
evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may
not be recoverable. In evaluating impairment, the company
estimates the sum of the expected future cash flows,
undiscounted and without interest charges, derived from such
goodwill over its remaining life. The company believes that no
impairment exists at December 31, 2001. The amortization
recorded for 2001, 2000 and 1999 was $20.6 million,
$17.2 million and $17.2 million, respectively.
Accumulated amortization at December 31, 2001 and 2000 was
$120.3 million and $101.0 million, respectively.

In June 2001, FASB issued SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS
No. 142, goodwill and intangible assets with indefinite
lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

arise) for impairment. Separable intangible assets that are not
deemed to have indefinite lives will continue to be amortized
over their useful lives (but with no maximum life). The
amortization provisions of SFAS No. 142 were applied
immediately to the $1.3 million of goodwill and intangible
assets that were recognized in acquisitions initiated after
June 30, 2001. With respect to goodwill and intangible
assets acquired prior to July 1, 2001, the company is
required to adopt SFAS No. 142 effective January 1,
2002. As of December 31, 2001, the company had goodwill,
net of amortization, of $474.4 million that will be subject
to the provisions of SFAS No. 142. The results of
operations for the 12 months ended December 31, 2001
included $20.6 million of goodwill amortization expense
that under SFAS No. 142 would not have been required.
Management is currently reviewing the provisions of these new
pronouncements and their impact on the companys
consolidated financial statements.

Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of

The company accounts for long-lived assets in accordance with
the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets is measured by comparing the carrying
amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. Such evaluations for
impairment are significantly impacted by estimates of future
prices for the companys products, capital needs, economic
trends in the construction sector and other factors. If such
assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reflected at the lower of their
carrying amount or fair value less cost to sell.

Other Postretirement Benefits

The company accrues the expected cost of retiree health care and
life insurance benefits and charges it to expense during the
years that the employees render service.

In addition, the company accrues for benefits provided to former
or inactive employees after employment but before retirement
when it becomes probable that such benefits will be paid and
when sufficient information exists to make reasonable estimates
of the amounts to be paid.

Environmental Remediation Liabilities

When the company determines that it is probable that a liability
for environmental matters has been incurred, an undiscounted
estimate of the required remediation costs is recorded as a
liability in the consolidated financial statements, without
offset of potential insurance recoveries. Costs that extend the
life, increase the capacity or improve the safety or efficiency
of company-owned assets or are incurred to mitigate or prevent
future environmental contamination may be capitalized. Other
environmental costs are expensed when incurred.

Revenue Recognition

Revenue from the sale of cement, cement-related products,
concrete, concrete products, aggregate and gypsum drywall is
recorded when the products are shipped. Revenue from waste
recovery and disposal is recognized when the material is
received, tested and accepted. Revenue from road construction
contracts is recognized on the basis of units of work completed,
while revenue from other indivisible lump sum contracts is
recognized using the percentage-of-completion method. Amounts
billed to a customer in a sales transaction related to shipping
and handling are included in net sales, and costs
incurred for shipping and handling are classified as cost
of goods sold in the Consolidated Statements of Income.

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Research and Development

The company is committed to improving its manufacturing process,
maintaining product quality and meeting existing and future
customer needs. These objectives are pursued through various
programs. Research and development costs, which are charged to
expense as incurred, were $7.2 million, $7.2 million and
$7.5 million for 2001, 2000 and 1999, respectively.

Other Income, Net

Other income, net consists of a variety of items that management
believes are non-operating in nature. Key categories (with
amounts for 2001, 2000 and 1999, respectively) include gains on
sale of fixed assets ($8.0 million, $9.5 million and
$6.2 million), gains on divestitures of businesses
($23.2 million, $6.3 million and $4.6 million),
loss on the sale of receivables under our securitization program
($7.1 million, $3.0 million and zero), losses on
natural gas commodity contracts ($8.1 million, zero and
zero), losses or gains for other postretirement benefit expense
for retirees and pension costs ($6.9 million loss,
$4.1 million gain and $19.7 million loss), equity
income ($2.8 million, $6.9 million and $6.6 million),
expenses for restructuring ($7.1 million, zero and zero),
foreign exchange transaction gains or losses ($0.3 million loss,
$2.5 million gain and $0.8 million loss), Blue Circle
management fees ($5.6 million, zero and zero), settlement
from an insurance claim (zero, zero and $3.8 million) and
other miscellaneous gains or losses ($8.7 million net loss,
$2.7 million net gain and $7.8 million net gain).

Interest

The company capitalizes interest costs incurred during the
construction of new facilities as an element of construction in
progress and amortizes such costs over the assets
estimated useful lives. Interest of $11.1 million,
$11.7 million and $4.7 million was capitalized in
2001, 2000 and 1999, respectively.

Income Taxes

Income taxes are accounted for under the asset and liability
method. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. This method also
requires the recognition of future tax benefits such as net
operating loss carryforwards, to the extent that realization of
such benefits is more likely than not. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.

Restructuring

In the second half of 2001, the company adopted a long-term
strategic plan to reorganize its cement operations into five
geographic regions. The new organization, which was designed
primarily to better serve our customers, was implemented
effective January 1, 2002. The company recorded in
other income, net in the Consolidated Statements of
Income $7.1 million in costs related to this restructuring,
of which $3.4 million were accrued as of December 31,
2001.

Net Income Per Common Equity Share

The calculation of basic net income per common equity share is
based on the weighted average number of shares of Common Stock
and Exchangeable Shares outstanding in each period. The basic
weighted average number of shares was (in thousands) 72,043,
73,254 and 72,637 in 2001, 2000 and 1999, respectively.

62



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

The weighted average number of shares and share equivalents
outstanding, assuming dilution from the exercise of stock
options and stock warrant using the treasury stock method, was
(in thousands) 72,910, 73,379 and 73,022 in 2001, 2000 and 1999,
respectively.

Accounting for Stock-Based Compensation

The company accounts for employee stock options using the method
of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and the associated
interpretations. Generally, no expense is recognized related to
the companys stock options because the options
exercise price is set at the stocks fair market value on
the date the option is granted.

In accordance with SFAS No. 123, Accounting for
Stock-Based Compensation, the company discloses the
compensation cost based on the estimated fair value of the
options at the grant dates.

Accounting Pronouncements Not Yet
Effective

In June 2001, FASB issued SFAS No. 143, Accounting
for Asset Retirement Obligations. This statement addresses
financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the
associated asset retirement costs. The purpose of this statement
is to develop consistent accounting for asset retirement
obligations and related costs in the financial statements and
provide more information about future cash outflows, leverage
and liquidity regarding retirement obligations and the gross
investment in long-lived assets. This statement is effective for
financial statements issued for fiscal years beginning after
June 15, 2002. The company will be required to implement
SFAS No. 143 on January 1, 2003 and is currently
reviewing the provisions of the pronouncement and its impact on
the consolidated financial statements.

In August 2001, FASB issued SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. This
statement addresses financial accounting and reporting for the
impairment or disposal of long-lived assets, superceding SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. The
company will adopt this statement on January 1, 2002 and
does not expect any impact to its financial position.

Acquisitions, Dispositions and Significant
Capital Developments

In July 2001, the company purchased for $14.3 million
certain of Blue Circle Industries PLCs North American
assets from Lafarge S.A. that are not part of the Blue Circle
Asset Management Agreement. Those businesses include sand and
gravel operations in Ontario and near Buffalo, New York, two
Ontario ready-mixed concrete plants and a cold patch asphalt
business with operations in Canada and the U.S. Additionally,
the company completed other acquisitions in 2001 totaling
$66.3 million in cash. These acquisitions included the
February 2001 purchase of substantially all of the assets of
Pine Hill Materials Corp. and American Readi-Mix Concrete
Corporation, New York-based construction materials companies,
and in June 2001, Rocky Mountain Construction Materials, an
aggregate and ready-mixed concrete company based in Colorado.

In December 2001, the company sold its joint venture interest in
Centennial Concrete Pipe & Products for approximately
$31 million and sold non-strategic ready-mixed concrete
businesses in Wisconsin for approximately $19 million.

In late December 2000, the company completed its merger of
Kilmer Van Nostrand Co. Limiteds (KVN) wholly-owned
subsidiary, the Warren Paving & Materials Group Limited
(Warren), with the companys construction
materials operations in Canada. Warren is a supplier of
construction aggregate and provides asphalt and paving services
in five Canadian provinces. The transaction, in which a
subsidiary of LCI acquired all of the outstanding shares of
Warren for cash, preferred stock and a note, was valued at
$259.9 million. The acquisition was recorded under the purchase
method of accounting and, therefore, the purchase

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

price has been allocated to assets acquired and liabilities
assumed based on estimated fair values. The excess of purchase
price over the fair value of the net assets is being amortized
on a straight-line basis over 40 years.

The estimated fair value of assets acquired and liabilities
assumed relating to the Warren merger is summarized below (in
thousands):

|                              |       |   |         |         | 
|----------------------------- | ----- | - | ------- | ------- | 
|                             
|                             
|                             
|                             
|Working capital               |       | $ | 50,015  |        
|                             
|                             
|                             
|                             
|Property, plant and equipment |       |   | 158,477 |        
|                             
|                             
|                             
|                             
|Other assets                  |       |   | 1,270   |        
|                             
|                             
|                             
|                             
|Goodwill                      |       |   | 92,220  |        
|                             
|                             
|                             
|                             
|Long-term liabilities         |       |   | (42,127 | )      
|                              |       |   |         |        
|                              | Total |   | $       | 259,855 | 
|                              |       |   |         |        

The following unaudited pro forma financial information for the
company gives effect to the Warren merger as if the transaction
had been completed as of the beginning of Lafarges fiscal
years 2000 and 1999. These pro forma results have been prepared
for comparative purposes only and include certain adjustments,
such as depreciation and depletion on the revalued property,
plant and equipment and amortization of goodwill and do not
reflect any benefits which might be attained from combining the
operations. The pro forma results of operations do not
necessarily reflect the actual results that would have occurred,
nor is such information necessarily indicative of future results
of operations (in thousands, except per share amounts):

|                       |                                |                         |   |           |  |  |   |           | 
|---------------------- | ------------------------------ | ----------------------- | - | --------- |  |  | - | --------- | 
|                       |                                |                        
|                       |                                | Years Ended December 31
|                       |                                |                        
|                       |                                | 2000                    |   | 1999     
|                       |                                |                         |   |          
|Pro forma (unaudited): |                                |                         |   |           |  |  |   |          
|                      
|                      
|                      
|                      
|                       | Net sales                      |                         | $ | 3,192,194 |  |  | $ | 3,062,323 | 
|                      
|                      
|                      
|                      
|                       | Net income                     |                         | $ | 259,776   |  |  | $ | 269,176   | 
|                      
|                      
|                      
|                      
|                       | Net income per share  basic   |                         | $ | 3.55      |  |  | $ | 3.71      | 
|                      
|                      
|                      
|                      
|                       | Net income per share  diluted |                         | $ | 3.54      |  |  | $ | 3.69      | 

In addition to Warren, the company completed other acquisitions
in 2000 totaling $110 million, including the Presque Isle
Corporation, a Michigan-based quarry operation, in June 2000.
During the first half of 2000, the company also formed a joint
venture with Rock-Tenn Company to produce gypsum drywall
paperboard liner and in March 2000 entered into an agreement
with Ispat Inland Inc. to manage up to one million tons per year
of blast furnace slag. Additionally, in June 2000, the company
completed the construction of a $90 million state-of-the-art
gypsum drywall plant in northern Kentucky, just outside of
Cincinnati.

In 1999, the company completed acquisitions totaling
$58 million, including the acquisitions of a gypsum drywall
plant located in Newfoundland, Canada in January 1999, and Corn
Construction Co., an aggregate and asphalt paving business in
New Mexico and southern Colorado, in March 1999. In September
1999, the company announced that it would build a new
$85 million gypsum drywall manufacturing facility in
northern Florida, which became operational in January 2001. In
late 1999, the company sold under-performing and non-strategic
asphalt and paving operations in Maryland for approximately
$25 million.

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Receivables

Receivables consist of the following (in thousands):

|                                     |                        |             |         |         |  |   |         |         | 
|------------------------------------ | ---------------------- | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                     |                        |            
|                                     |                        | December 31
|                                     |                        |            
|                                     |                        | 2001        |         | 2000   
|                                     |                        |             |         |        
|Trade and notes receivable           |                        | $           | 407,497 |         |  | $ | 316,019 |        
|                                    
|                                    
|                                    
|                                    
|Subordinated interest in receivables |                        |             | 87,004  |         |  |   | 36,635  |        
|                                    
|                                    
|                                    
|                                    
|Retainage on long-term contracts     |                        |             | 18,947  |         |  |   | 21,397  |        
|                                    
|                                    
|                                    
|                                    
|Other receivables                    |                        |             | 16,233  |         |  |   | 39,290  |        
|                                    
|                                    
|                                    
|                                    
|Allowances                           |                        |             | (33,725 | )       |  |   | (27,429 | )      
|                                     |                        |             |         |         |  |   |         |        
|                                     | Total receivables, net |             | $       | 495,956 |  |   | $       | 385,912 | 
|                                     |                        |             |         |         |  |   |         |        

During 2000, the company entered into a receivables
securitization program to provide a cost-effective source of
working capital and short-term financing. Under the program, the
company agreed to sell, on a revolving basis, certain of its
accounts receivable to a wholly-owned, special purpose
subsidiary (the SPS). The SPS in turn entered into
an agreement to transfer, on a revolving basis, an undivided
percentage ownership interest in a designated pool of accounts
receivable to unrelated third-party purchasers, through the use
of a qualified special purpose entity, up to a maximum of
$200 million. Under the agreements, new receivables are
added to the pool as collections reduce previously sold
receivables. The company services, administers and collects the
receivables sold.

On April 1, 2001, the company adopted the provisions of
SFAS No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, a
replacement of FASB Statement No. 125, which is
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31,
2001. SFAS No. 140 revised the standards for accounting for
securitizations and other transfers of financial assets and
collateral. The adoption of this standard did not have an impact
on the companys results of operations or financial
condition. According to SFAS No. 140, the receivables
securitization transactions were accounted for as sales and, as
a result, the related receivables and debt have been excluded
from the accompanying Consolidated Balance Sheets. The company
has received proceeds from the sale of trade receivables
totaling $1,990.9 million and $713.8 million for the
years ended December 31, 2001 and 2000, respectively. At
December 31, 2001 and 2000, the company administered
$116.5 million and $146.0 million, respectively, of
receivables outstanding that were sold under this arrangement.
In 2001 and 2000, the related fees and discounting expense of
$7.1 million and $3.0 million, respectively, have been
recorded as other income, net in the accompanying
Consolidated Statements of Income. The SPS holds a subordinated
retained interest in the receivables not sold to third parties
amounting to $87.0 million and $36.6 million at
December 31, 2001 and 2000, respectively. The subordinated
interest in receivables is recorded at fair value, which is
determined based on the present value of future expected cash
flows estimated using managements best estimates of credit
losses and discount rates commensurate with the risks involved.
Due to the short-term nature of trade receivables, the carrying
amount, less allowances, approximates fair value. Variations in
the credit and discount assumptions would not significantly
impact fair value.

65



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Inventories

Inventories consist of the following (in thousands):

|                                   |                   |             |         |         |  |   |         |         | 
|---------------------------------- | ----------------- | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                   |                   |            
|                                   |                   | December 31
|                                   |                   |            
|                                   |                   | 2001        |         | 2000   
|                                   |                   |             |         |        
|Finished products                  |                   | $           | 199,156 |         |  | $ | 205,328 |        
|                                  
|                                  
|                                  
|                                  
|Work in process                    |                   |             | 23,187  |         |  |   | 31,499  |        
|                                  
|                                  
|                                  
|                                  
|Raw materials and fuel             |                   |             | 60,214  |         |  |   | 69,745  |        
|                                  
|                                  
|                                  
|                                  
|Maintenance and operating supplies |                   |             | 68,303  |         |  |   | 65,851  |        
|                                   |                   |             |         |         |  |   |         |        
|                                   | Total inventories |             | $       | 350,860 |  |   | $       | 372,423 | 
|                                   |                   |             |         |         |  |   |         |        

Included in the finished products, work in process and raw
materials and fuel categories are inventories valued using the
LIFO method of $73.2 million and $83.6 million at
December 31, 2001 and 2000, respectively. If these
inventories were valued using the average cost method, such
inventories would have decreased by $4.8 million and
$6.6 million, respectively.

Property, Plant and Equipment

Property, plant and equipment consist of the following (in
thousands):

|                                       |                                           |             |            |           |  |   |            |           | 
|-------------------------------------- | ----------------------------------------- | ----------- | ---------- | --------- |  | - | ---------- | --------- | 
|                                       |                                           |            
|                                       |                                           | December 31
|                                       |                                           |            
|                                       |                                           | 2001        |            | 2000     
|                                       |                                           |             |            |          
|Land and mineral deposits              |                                           | $           | 525,742    |           |  | $ | 550,921    |          
|                                      
|                                      
|                                      
|                                      
|Buildings, machinery and equipment     |                                           |             | 2,780,576  |           |  |   | 2,668,372  |          
|                                      
|                                      
|                                      
|                                      
|Construction in progress               |                                           |             | 378,303    |           |  |   | 303,342    |          
|                                       |                                           |             |            |           |  |   |            |          
|Property, plant and equipment, at cost |                                           |             | 3,684,621  |           |  |   | 3,522,635  |          
|                                      
|                                      
|                                      
|                                      
|Accumulated depreciation and depletion |                                           |             | (1,489,507 | )         |  |   | (1,400,245 | )        
|                                       |                                           |             |            |           |  |   |            |          
|                                       | Total property, plant and equipment,
	net |             | $          | 2,195,114 |  |   | $          | 2,122,390 | 
|                                       |                                           |             |            |           |  |   |            |          

Other Assets

Other assets consist of the following (in thousands):

|                                        |                    |             |         |         |  |   |         |         | 
|--------------------------------------- | ------------------ | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                        |                    |            
|                                        |                    | December 31
|                                        |                    |            
|                                        |                    | 2001        |         | 2000   
|                                        |                    |             |         |        
|Long-term receivables                   |                    | $           | 22,699  |         |  | $ | 24,343  |        
|                                       
|                                       
|                                       
|                                       
|Investments in unconsolidated companies |                    |             | 31,210  |         |  |   | 38,431  |        
|                                       
|                                       
|                                       
|                                       
|Prepaid pension asset                   |                    |             | 138,185 |         |  |   | 136,429 |        
|                                       
|                                       
|                                       
|                                       
|Intangible assets                       |                    |             | 19,197  |         |  |   | 19,744  |        
|                                       
|                                       
|                                       
|                                       
|Property held for sale                  |                    |             | 12,619  |         |  |   | 14,476  |        
|                                       
|                                       
|                                       
|                                       
|Other                                   |                    |             | 40,168  |         |  |   | 31,841  |        
|                                        |                    |             |         |         |  |   |         |        
|                                        | Total other assets |             | $       | 264,078 |  |   | $       | 265,264 | 
|                                        |                    |             |         |         |  |   |         |        

Property held for sale is carried at the lower of cost or
estimated net realizable value.

66



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the
following (in thousands):

|                                                 |                                                 |             |         |         |  |   |         |         | 
|------------------------------------------------ | ----------------------------------------------- | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                                 |                                                 |            
|                                                 |                                                 | December 31
|                                                 |                                                 |            
|                                                 |                                                 | 2001        |         | 2000   
|                                                 |                                                 |             |         |        
|Trade accounts payable                           |                                                 | $           | 232,300 |         |  | $ | 201,917 |        
|                                                
|                                                
|                                                
|                                                
|Accrued payroll expense                          |                                                 |             | 77,391  |         |  |   | 74,392  |        
|                                                
|                                                
|                                                
|                                                
|Bank overdrafts                                  |                                                 |             |        |         |  |   | 26,172  |        
|                                                
|                                                
|                                                
|                                                
|Payable to bank under receivable sales agreement |                                                 |             | 68,689  |         |  |   | 21,712  |        
|                                                
|                                                
|                                                
|                                                
|Other accrued liabilities                        |                                                 |             | 177,116 |         |  |   | 177,837 |        
|                                                 |                                                 |             |         |         |  |   |         |        
|                                                 | Total accounts payable and accrued
	liabilities |             | $       | 555,496 |  |   | $       | 502,030 | 
|                                                 |                                                 |             |         |         |  |   |         |        

Debt

Debt consists of the following (in thousands):

|                                                                                                                                                                                                                                                                                                                                                                |                      |             |          |         |  |   |          |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ----------- | -------- | ------- |  | - | -------- | ------- | 
|                                                                                                                                                                                                                                                                                                                                                                |                      |            
|                                                                                                                                                                                                                                                                                                                                                                |                      | December 31
|                                                                                                                                                                                                                                                                                                                                                                |                      |            
|                                                                                                                                                                                                                                                                                                                                                                |                      | 2001        |          | 2000   
|                                                                                                                                                                                                                                                                                                                                                                |                      |             |          |        
|Senior notes in the amounts of $250,000, $200,000
	and $200,000, maturing in 2005, 2008 and 2013, respectively,
	bearing interest at fixed rates of 6.4 percent,
	6.5 percent and 6.9 percent, respectively, stated net
	of deferred losses on forward treasury lock and original issue
	discount. The weighted average effective interest rate is
	6.5 percent |                      | $           | 637,483  |         |  | $ | 635,422  |        
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|Medium-term notes maturing in various amounts
	between 2002 and 2006, bearing interest at fixed rates that
	range from 9.3 percent to 9.8 percent                                                                                                                                                                                                               |                      |             | 12,000   |         |  |   | 41,841   |        
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|Tax-exempt bonds maturing in various amounts
	between 2002 and 2026, bearing interest at floating rates that
	range from 1.4 percent to 3.8 percent                                                                                                                                                                                                             |                      |             | 26,383   |         |  |   | 26,917   |        
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|Short-term borrowings, including commercial paper                                                                                                                                                                                                                                                                                                               |                      |             | 180,502  |         |  |   | 156,804  |        
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|Other                                                                                                                                                                                                                                                                                                                                                           |                      |             | 28,695   |         |  |   | 16,714   |        
|                                                                                                                                                                                                                                                                                                                                                                |                      |             |          |         |  |   |          |        
|Subtotal                                                                                                                                                                                                                                                                                                                                                        |                      |             | 885,063  |         |  |   | 877,698  |        
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                               
|Less short-term borrowings and current portion of
	long-term debt, net of deferred losses on forward treasury lock
	and original issue discount of $2,060                                                                                                                                                                                                       |                      |             | (210,447 | )       |  |   | (190,250 | )      
|                                                                                                                                                                                                                                                                                                                                                                |                      |             |          |         |  |   |          |        
|                                                                                                                                                                                                                                                                                                                                                                | Total long-term debt |             | $        | 674,616 |  |   | $        | 687,448 | 
|                                                                                                                                                                                                                                                                                                                                                                |                      |             |          |         |  |   |          |        

The fair value of debt at December 31, 2001 and 2000,
respectively, was approximately $839.0 million and
$835.3 million compared with $885.1 million and
$877.7 million included in the Consolidated Balance Sheets.
This fair value was estimated based on quoted market prices or
current interest rates offered to the company for debt of the
same maturity.

67



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

The scheduled annual principal payment requirements on debt for
each of the five years in the period ending December 31,
2006 are as follows (in thousands):

|                                                                           |       |   |         |         | 
|-------------------------------------------------------------------------- | ----- | - | ------- | ------- | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|2002                                                                       |       | $ | 212,507 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|2003                                                                       |       |   | 4,380   |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|2004                                                                       |       |   | 1,860   |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|2005                                                                       |       |   | 251,122 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|2006                                                                       |       |   | 22,777  |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Thereafter                                                                 |       |   | 404,934 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Less deferred losses on forward treasury lock and
	original issue discount |       |   | (12,517 | )      
|                                                                           |       |   |         |        
|                                                                           | Total |   | $       | 885,063 | 
|                                                                           |       |   |         |        

In March 2001, the company entered into commercial paper
agreements, under which the company may from time to time issue
up to an aggregate principal amount of $300 million in
unsecured, short-term promissory notes through private
placements. At December 31, 2001, the company had
$157.7 million of commercial paper outstanding under the
agreements with a weighted-average interest rate of
2.74 percent and maturity dates ranging from 4 to
31 days. The agreements, which expire in April 2002,
require the maintenance of certain financial ratios, among other
restrictions. Other short-term borrowings outstanding at
December 31, 2001 of $22.8 million were made under
various credit facilities that bear interest at variable rates
(2.25 percent as of December 31, 2001) based on a
banks prime lending rate or the applicable federal funds
rate and are subject to certain conditions.

The company has a syndicated, committed revolving credit
facility totaling $300 million extending through
December 8, 2003. At the end of 2001, no amounts were
outstanding. The company is required to pay annual commitment
fees of 0.11 percent of the total amount of the facilities.

The companys debt agreements require the maintenance of
certain financial ratios relating to fixed charge coverage and
leverage, among other restrictions. At December 31, 2001,
the company was in compliance with these requirements.

Minority Interests

Minority interests primarily consist of 166.4 million
shares of no par preferred stock (the Preferred
Shares) issued by a subsidiary of the company on
December 29, 2000, in conjunction with the Warren merger.
No gain or loss was recognized as a result of the issuance of
these securities, and the company owned substantially all of the
voting equity of the subsidiary both before and after the
transaction. The holder of the Preferred Shares is entitled to
receive cumulative, preferential cash dividends at the annual
rate of 6.0 percent of the issue price (Canadian
$166.4 million, or approximately U.S. $105 million) from
2001 to 2003, 5.5 percent of the issue price from 2004 to
2005 and 5.0 percent of the issue price thereafter. In
addition, the holder may receive additional dividends based on
its share of the total after-tax proceeds received by Warren
from the sale of certain assets during each quarter. During
2001, the company paid $0.6 million in additional
dividends, which are included in minority interests
in the accompanying Consolidated Statements of Income.

The Preferred Shares are redeemable at the original issue price,
in whole or in part, on or after December 29, 2005 at the
option of the holder thereof. Further, at any time following
December 29, 2015, the company may redeem all or a portion
of the then outstanding Preferred Shares at an amount equal to
the issuance price.

68



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

The Preferred Shares are entitled to a preference over the
Common Stock and Exchangeable Shares with respect to the payment
of dividends and to the distribution of assets in the event of
the issuing subsidiarys liquidation or dissolution.

Other Long-Term Liabilities

Other long-term liabilities consist of the following (in
thousands):

|                                    |                                   |             |         |         |  |   |         |         | 
|----------------------------------- | --------------------------------- | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                    |                                   |            
|                                    |                                   | December 31
|                                    |                                   |            
|                                    |                                   | 2001        |         | 2000   
|                                    |                                   |             |         |        
|Deferred income taxes               |                                   | $           | 206,940 |         |  | $ | 206,067 |        
|                                   
|                                   
|                                   
|                                   
|Accrued postretirement benefit cost |                                   |             | 175,408 |         |  |   | 174,165 |        
|                                   
|                                   
|                                   
|                                   
|Accrued pension liability           |                                   |             | 49,708  |         |  |   | 33,084  |        
|                                   
|                                   
|                                   
|                                   
|Other                               |                                   |             | 65,681  |         |  |   | 52,162  |        
|                                    |                                   |             |         |         |  |   |         |        
|                                    | Total other long-term liabilities |             | $       | 497,737 |  |   | $       | 465,478 | 
|                                    |                                   |             |         |         |  |   |         |        

Derivative Instruments and Hedging Activities

The company maintains a commodity-price risk management strategy
that uses derivative instruments to minimize significant,
unanticipated fluctuations caused by commodity-price volatility.
The manufacturing of certain of the companys products
requires significant consumption of fuel. Price fluctuations in
natural gas cause market values to differ from the value of the
fixed price in the forward agreements.

The company uses commodity-based derivatives to manage its
exposure to commodity price fluctuations. The company executes
these commodity-based derivatives for the purpose of hedging the
economic exposure to commodity price changes, not for trading or
speculative purposes.

The company periodically enters into natural gas forward
purchase agreements for a portion of its anticipated gas
purchases to hedge the price risk associated with fluctuations
in market prices. The forward agreements eliminate the exposure
to the unfavorable impact price increases will have on natural
gas purchases. As of December 31, 2001, the company had
executed an outstanding forward, fixed-price supply contracts
that are considered derivative instruments under SFAS
No. 133. When applying the provisions of SFAS No. 133
to these contracts, the company did not apply hedge accounting
and an $8.1 million loss on these contracts is reflected in
other income, net in the accompanying Consolidated
Statement of Income in 2001. As guidance related to the
application of SFAS No. 133 continues to be finalized, the
company plans to reassess the prospective hedge accounting
policy for applying SFAS No. 133 to these contracts.

Prior to the adoption of SFAS No. 133, the company entered
into interest rate forward agreements to reduce its exposure to
market risks from changing interest rates related to anticipated
debt issuances. These contracts were terminated prior to
adoption of SFAS No. 133 when the hedged forecasted debt
was issued, and any resulting hedging gains and losses from
these contracts are reported as a component of the carrying
amount of the hedged debt and are being recognized as a yield
adjustment over the remaining debt terms.

Common Equity Interests

Holders of Exchangeable Shares have voting, dividend and
liquidation rights that parallel those of holders of Common
Stock. The Exchangeable Shares may be converted to Common Stock
on a one-for-one basis. Dividends on the Exchangeable Shares are
cumulative and payable at the same time as any dividends
declared on the Common Stock. The company has agreed not to pay
dividends on the Common Stock without causing LCI to declare an
equivalent dividend in Canadian dollars on the Exchangeable
Shares. Dividend payments

69



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

and the exchange rate on the Exchangeable Shares are subject to
adjustment from time to time to take into account certain
dilutive events.

At December 31, 2001, the company had reserved for issuance
approximately 8.6 million shares of Common Stock for the
exchange of outstanding Exchangeable Shares. Additional common
equity shares are reserved to cover grants under the
companys stock option program (5.3 million) and
issuances pursuant to the employee stock purchase plan
(1.4 million).

In July 2000, the company announced a buyback program of Common
Stock over the following 18 months. The plan allowed the
company, at managements discretion, to buy back up to
$100 million of the Common Stock from time to time on the
market or through privately negotiated transactions. For the
years ended December 31, 2001 and 2000, the company bought
back approximately 0.9 million and 2.5 million shares of
Common Stock at an average cost of $31.83 and $20.20 per share,
respectively.

In connection with the Warren merger, the company issued a
common stock warrant for $14.4 million. The warrant
entitles the holder to acquire up to 4.4 million shares of
Common Stock at an exercise price of $29 per share and is
exercisable for a period of 10 years commencing on
December 29, 2005.

Optional Stock Dividend Plan

The company has an optional stock dividend plan that permits
holders of record of common equity shares to elect to receive
new common equity shares issued as stock dividends in lieu of
cash dividends on such shares. The common equity shares are
issued under the plan at 95 percent of the average market
price, as defined in the plan.

Stock Option and Purchase Plans

The company maintains a fixed stock option plan and an employee
stock purchase plan. Under the fixed stock option plan,
directors and key employees of the company may be granted stock
options that entitle the holder to receive shares of Common
Stock based on the market price of the securities at the date of
grant. Directors options are exercisable based on the
length of a directors service on the Board of Directors
and become fully exercisable when a director has served on the
Board for over four years. Employee options vest ratably over a
four-year period. The options expire 10 years after the
date of grant. There were approximately 4.0 million and
3.8 million outstanding options at December 31, 2001
and 2000, respectively.

The employee stock purchase plan allows substantially all
employees to purchase Common Stock, through payroll deductions,
at 90 percent of the lower of the beginning or end of the
plan year market prices. During 2001, 65,555 shares were
issued under the plan at a share price of $22.95; in 2000,
93,500 shares were issued at a price of $22.95; and in
1999, 67,800 shares were issued at a price of $30.09. At
December 31, 2001 and 2000, $1.4 million and
$1.2 million, respectively, were subscribed for future
share purchases.

The company accounts for its stock option plans under
APB Opinion No. 25 and the associated interpretations.
Accordingly, no compensation expense was recognized for these
plans.

For disclosure purposes under SFAS No. 123,
Accounting for Stock-Based Compensation, employee
stock options are valued at the grant date using the
Black-Scholes option-pricing model and compensation expense is
recognized ratably over the vesting period. The weighted average
assumptions used in the Black-Scholes model to value the option
awards in 2001, 2000 and 1999, respectively, are as follows:
dividend yield of 2.0 percent, 2.6 percent and
1.6 percent; expected volatility of 43.0 percent,
33.0 percent and 28.5 percent; risk-free interest rates of
4.9 percent, 6.7 percent and 4.9 percent; and
expected lives of 5.4 years for all three years.

70



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

If the company had recognized compensation expense for the fixed
stock option plan based on the fair value at the grant dates for
awards, pro forma income statements for 2001, 2000 and 1999
would be as follows:

|                             |             |                                          |   |         |  |      |   |         |  |  |   |         | 
|---------------------------- | ----------- | ---------------------------------------- | - | ------- |  | ---- | - | ------- |  |  | - | ------- | 
|                             |             |                                         
|                             |             | Years Ended December 31                 
|                             |             |                                         
|                             |             | 2001                                     |   | 2000    |  | 1999
|                             |             |                                          |   |         |  |     
|                             |             |                                         
|                             |             | (in thousands, except per share amounts)
|                            
|                            
|                            
|                            
|Net Income                   |             |                                          |   |         |  |      |   |         |  |  |   |        
|                            
|                            
|                            
|                            
|                             | As reported |                                          | $ | 234,090 |  |      | $ | 257,367 |  |  | $ | 275,374 | 
|                            
|                            
|                            
|                            
|                             | Pro forma   |                                          | $ | 227,740 |  |      | $ | 252,805 |  |  | $ | 271,976 | 
|                            
|                            
|                            
|                            
|Basic Net Income Per Share   |             |                                          |   |         |  |      |   |         |  |  |   |        
|                            
|                            
|                            
|                            
|                             | As reported |                                          | $ | 3.25    |  |      | $ | 3.51    |  |  | $ | 3.79    | 
|                            
|                            
|                            
|                            
|                             | Pro forma   |                                          | $ | 3.16    |  |      | $ | 3.45    |  |  | $ | 3.74    | 
|                            
|                            
|                            
|                            
|Diluted Net Income Per Share |             |                                          |   |         |  |      |   |         |  |  |   |        
|                            
|                            
|                            
|                            
|                             | As reported |                                          | $ | 3.21    |  |      | $ | 3.51    |  |  | $ | 3.77    | 
|                            
|                            
|                            
|                            
|                             | Pro forma   |                                          | $ | 3.12    |  |      | $ | 3.45    |  |  | $ | 3.72    | 

The SFAS No. 123 method of accounting does not apply to
options granted before January 1, 1995. The pro forma
compensation cost may not be representative of that to be
expected in future years.

A summary of the status of the companys fixed stock option
plans as of December 31, 2001, 2000 and 1999, and changes
during the years ended on these dates, is presented below:

|                                                                |  |                         |           |         |  |        |       |         |  |        |           |         |  |   |       |  |  |  |           |   |  |   |       | 
|--------------------------------------------------------------- |  | ----------------------- | --------- | ------- |  | ------ | ----- | ------- |  | ------ | --------- | ------- |  | - | ----- |  |  |  | --------- | - |  | - | ----- | 
|                                                                |  |                        
|                                                                |  | Years Ended December 31
|                                                                |  |                        
|                                                                |  |                         |           |         |  |       
|                                                                |  | 2001                    |           | 2000    |  | 1999  
|                                                                |  |                         |           |         |  |       
|                                                                |  |                         |           | Average |  |        |       | Average |  |        |           | Average
|                                                                |  |                         |           | Option  |  |        |       | Option  |  |        |           | Option 
|                                                                |  | Shares                  |           | Price   |  | Shares |       | Price   |  | Shares |           | Price  
|                                                                |  |                         |           |         |  |        |       |         |  |        |           |        
|Balance outstanding at January 1                                |  |                         | 3,835,175 |         |  | $      | 27.08 |         |  |        | 2,987,875 |         |  | $ | 28.32 |  |  |  | 2,333,800 |   |  | $ | 24.74 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Options granted                                                 |  |                         | 1,088,750 |         |  | $      | 30.09 |         |  |        | 938,800   |         |  | $ | 23.00 |  |  |  | 828,200   |   |  | $ | 38.13 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Options exercised                                               |  |                         | (801,850  | )       |  | $      | 20.42 |         |  |        | (28,852   | )       |  | $ | 19.36 |  |  |  | (89,250   | ) |  | $ | 18.90 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Options canceled                                                |  |                         | (143,125  | )       |  | $      | 30.84 |         |  |        | (62,648   | )       |  | $ | 30.13 |  |  |  | (84,875   | ) |  | $ | 34.98 | 
|                                                                |  |                         |           |         |  |        |       |         |  |        |           |         |  |   |       |  |  |  |           |   |  |   |       | 
|Balance outstanding at December 31                              |  |                         | 3,978,950 |         |  | $      | 29.12 |         |  |        | 3,835,175 |         |  | $ | 27.08 |  |  |  | 2,987,875 |   |  | $ | 28.32 | 
|                                                                |  |                         |           |         |  |        |       |         |  |        |           |         |  |   |       |  |  |  |           |   |  |   |       | 
|Options exercisable at December 31                              |  |                         | 1,716,933 |         |  | $      | 28.42 |         |  |        | 1,840,716 |         |  | $ | 24.62 |  |  |  | 1,272,233 |   |  | $ | 21.82 | 
|                                                                |  |                         |           |         |  |        |       |         |  |        |           |         |  |   |       |  |  |  |           |   |  |   |       | 
|Weighted average fair value of options granted
	during the year |  |                         |           |         |  | $      | 11.43 |         |  |        |           |         |  | $ | 7.45  |  |  |  |           |   |  | $ | 11.39 | 
|                                                                |  |                         |           |         |  |        |       |         |  |        |           |         |  |   |       |  |  |  |           |   |  |   |       | 

As of December 31, 2001, the 4.0 million fixed stock
options outstanding under the plans have an exercise price
between $14.38 per share and $38.13 per share and a weighted
average remaining contractual life of 7.05 years.

71



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Net Income Per Common Equity Share

|                                         |                                         |        |   |         |  |           |  |        |  |  |   |      | 
|---------------------------------------- | --------------------------------------- | ------ | - | ------- |  | --------- |  | ------ |  |  | - | ---- | 
|Years ended December 31                  |                                         |        |   |         |  | Per Share
|(in thousands, except per share amounts) |                                         | Income |   | Shares  |  | Amount   
|                                         |                                         |        |   |         |  |          
|2001                                     |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|Basic                                    |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|                                         | Net income                              |        | $ | 234,090 |  |           |  | 72,043 |  |  | $ | 3.25 | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|Diluted                                  |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|                                         | Options                                 |        |   |         |  |           |  | 505    |  |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|                                         | Stock warrant                           |        |   |         |  |           |  | 362    |  |  |   |      | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                         | Income available to common stockholders |        | $ | 234,090 |  |           |  | 72,910 |  |  | $ | 3.21 | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|2000                                     |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|Basic                                    |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|                                         | Net income                              |        | $ | 257,367 |  |           |  | 73,254 |  |  | $ | 3.51 | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|Diluted                                  |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|                                         | Options                                 |        |   |         |  |           |  | 125    |  |  |   |      | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                         | Income available to common stockholders |        | $ | 257,367 |  |           |  | 73,379 |  |  | $ | 3.51 | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|1999                                     |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|Basic                                    |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|                                         | Net income                              |        | $ | 275,374 |  |           |  | 72,637 |  |  | $ | 3.79 | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|Diluted                                  |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                        
|                                        
|                                        
|                                        
|                                         | Options                                 |        |   |         |  |           |  | 385    |  |  |   |      | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     
|                                         | Income available to common stockholders |        | $ | 275,374 |  |           |  | 73,022 |  |  | $ | 3.77 | 
|                                         |                                         |        |   |         |  |           |  |        |  |  |   |     

Basic net income per common equity share was computed by
dividing net income by the weighted average number of shares of
Common Stock and Exchangeable Shares outstanding during the
year. Diluted net income per common equity share assumed the
exercise of stock options and stock warrant for all years
presented.

Income Taxes

Earnings before income taxes is summarized by country in the
following table (in thousands):

|                             |  |                         |         |      |  |      |         |  |  |   |         | 
|---------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                             |  |                        
|                             |  | Years Ended December 31
|                             |  |                        
|                             |  | 2001                    |         | 2000 |  | 1999
|                             |  |                         |         |      |  |     
|U.S.                         |  | $                       | 143,526 |      |  | $    | 248,476 |  |  | $ | 280,854 | 
|                            
|                            
|                            
|                            
|Canada                       |  |                         | 202,630 |      |  |      | 155,353 |  |  |   | 155,932 | 
|                             |  |                         |         |      |  |      |         |  |  |   |         | 
|Earnings before income taxes |  | $                       | 346,156 |      |  | $    | 403,829 |  |  | $ | 436,786 | 
|                             |  |                         |         |      |  |      |         |  |  |   |         | 

72



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

The provision for income taxes includes the following components
(in thousands):

|          |        |                         |                    |        |         |         |   |        |         |         |   |         |         |         | 
|--------- | ------ | ----------------------- | ------------------ | ------ | ------- | ------- | - | ------ | ------- | ------- | - | ------- | ------- | ------- | 
|          |        |                        
|          |        | Years Ended December 31
|          |        |                        
|          |        | 2001                    |                    | 2000   |         | 1999   
|          |        |                         |                    |        |         |        
|Current:  |        |                         |                    |        |         |         |   |        |         |         |   |        
|         
|         
|         
|         
|          | U.S.   |                         | $                  | 45,355 |         |         | $ | 88,501 |         |         | $ | 100,152 |        
|         
|         
|         
|         
|          | Canada |                         |                    | 66,681 |         |         |   | 45,805 |         |         |   | 50,803  |        
|          |        |                         |                    |        |         |         |   |        |         |         |   |        
|          |        | Total current           |                    |        | 112,036 |         |   |        | 134,306 |         |   |         | 150,955 |        
|          |        |                         |                    |        |         |         |   |        |         |         |   |        
|Deferred: |        |                         |                    |        |         |         |   |        |         |         |   |        
|         
|         
|         
|         
|          | U.S.   |                         |                    | 6,271  |         |         |   | 3,277  |         |         |   | 2,472   |        
|         
|         
|         
|         
|          | Canada |                         |                    | (6,241 | )       |         |   | 8,879  |         |         |   | 7,985   |        
|          |        |                         |                    |        |         |         |   |        |         |         |   |        
|          |        | Total deferred          |                    |        | 30      |         |   |        | 12,156  |         |   |         | 10,457  |        
|          |        |                         |                    |        |         |         |   |        |         |         |   |        
|          |        |                         | Total income taxes |        | $       | 112,066 |   |        | $       | 146,462 |   |         | $       | 161,412 | 
|          |        |                         |                    |        |         |         |   |        |         |         |   |        

The Federal Statute of Limitations has closed for all U.S.
income tax returns through 1996. The companys Canadian
federal tax liability for all taxation years through 1997 has
been reviewed and finalized by Canada Customs and Revenue Agency
(CCRA). During 1995, an agreement was reached with
CCRA related to the pricing of certain cement sales between the
companys operations in Canada and the U.S. Under the terms
of the Canada-U.S. Income Tax Convention, the agreement was
submitted to the Competent Authorities of Canada and the U.S.
The Competent Authorities reached an agreement in 2000 that
resulted in reductions of the above noted transfer prices and
certain administrative expenses for 1986 to 1994 and granted
compensating adjustments in the U.S. for the same years. Amended
U.S. returns reflecting the Competent Authority compensating
adjustments are currently under review by the Internal Revenue
Service.

In 2001, the income tax expense was reduced by a deferred tax
adjustment resulting from the lowering of federal and provincial
tax rates in Canada. Enacted in June 2001, the tax reduction
program reduced income tax expense by approximately Canadian
$23 million (approximately U.S. $15 million).

A reconciliation of taxes at the U.S. federal income tax rate to
the companys actual income taxes is as follows (in
millions):

|                                                                         |  |                         |       |      |  |      |       |   |  |   |       |  
|------------------------------------------------------------------------ |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                                         |  |                        
|                                                                         |  | Years Ended December 31
|                                                                         |  |                        
|                                                                         |  | 2001                    |       | 2000 |  | 1999
|                                                                         |  |                         |       |      |  |     
|Taxes at the U.S. federal income tax rate                                |  | $                       | 121.2 |      |  | $    | 141.3 |   |  | $ | 152.9 |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|U.S./ Canadian tax rate differential                                     |  |                         | 5.0   |      |  |      | 4.3   |   |  |   | 4.7   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Canadian tax incentives                                                  |  |                         | (11.7 | )    |  |      | (9.2  | ) |  |   | (9.6  | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|U.S. state and Canadian provincial income taxes,
	net of federal benefit |  |                         | 9.2   |      |  |      | 15.0  |   |  |   | 19.3  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Enacted tax rate changes                                                 |  |                         | (15.2 | )    |  |      |      |   |  |   |      |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Dividends on the Preferred Shares                                        |  |                         | 3.9   |      |  |      |      |   |  |   |      |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other items                                                              |  |                         | (0.3  | )    |  |      | (4.9  | ) |  |   | (5.9  | )
|                                                                         |  |                         |       |      |  |      |       |   |  |   |       |  
|Provision for income taxes                                               |  | $                       | 112.1 |      |  | $    | 146.5 |   |  | $ | 161.4 |  
|                                                                         |  |                         |       |      |  |      |       |   |  |   |       |  

Deferred income taxes reflect the tax consequences of
temporary differences between the amounts of assets
and liabilities for financial reporting purposes and such
amounts as measured by tax law. These temporary differences are
determined in accordance with SFAS No. 109,
Accounting for Income Taxes.

73



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Temporary differences and carryforwards that give rise to
deferred tax assets and liabilities are as follows (in
thousands):

|                                         |                                |             |         |         |  |   |         |         | 
|---------------------------------------- | ------------------------------ | ----------- | ------- | ------- |  | - | ------- | ------- | 
|                                         |                                |            
|                                         |                                | December 31
|                                         |                                |            
|                                         |                                | 2001        |         | 2000   
|                                         |                                |             |         |        
|Deferred tax assets:                     |                                |             |         |         |  |   |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Reserves and other liabilities |             | $       | 59,971  |  |   | $       | 70,425  | 
|                                        
|                                        
|                                        
|                                        
|                                         | Other postretirement benefits  |             |         | 70,374  |  |   |         | 73,185  | 
|                                        
|                                        
|                                        
|                                        
|                                         | Tax loss carryforwards         |             |         | 3,654   |  |   |         | 5,020   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Tax credit carryforwards       |             |         |        |  |   |         | 743     | 
|                                        
|                                        
|                                        
|                                        
|                                         | Minimum pension liability      |             |         | 7,600   |  |   |         |        | 
|                                         |                                |             |         |         |  |   |         |        
|Gross deferred tax assets                |                                |             | 141,599 |         |  |   | 149,373 |        
|                                        
|                                        
|                                        
|                                        
|Valuation allowance                      |                                |             | (23,296 | )       |  |   | (23,296 | )      
|                                         |                                |             |         |         |  |   |         |        
|Net deferred tax assets                  |                                |             | 118,303 |         |  |   | 126,077 |        
|                                         |                                |             |         |         |  |   |         |        
|Deferred tax liabilities:                |                                |             |         |         |  |   |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Property, plant and equipment  |             |         | 214,534 |  |   |         | 219,100 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Prepaid pension asset          |             |         | 42,264  |  |   |         | 41,614  | 
|                                        
|                                        
|                                        
|                                        
|                                         | Other                          |             |         | 14,221  |  |   |         | 26,416  | 
|                                         |                                |             |         |         |  |   |         |        
|Gross deferred tax liabilities           |                                |             | 271,019 |         |  |   | 287,130 |        
|                                         |                                |             |         |         |  |   |         |        
|Net deferred tax liability               |                                |             | 152,716 |         |  |   | 161,053 |        
|                                        
|                                        
|                                        
|                                        
|Net deferred tax asset  current         |                                |             | 54,224  |         |  |   | 45,014  |        
|                                         |                                |             |         |         |  |   |         |        
|Net deferred tax liability 
	noncurrent |                                | $           | 206,940 |         |  | $ | 206,067 |        
|                                         |                                |             |         |         |  |   |         |        

A valuation allowance is provided to reduce the deferred tax
assets to a level which, more likely than not under the rules of
SFAS No. 109, will be realized.

At December 31, 2001, the company had net operating loss
carryforwards of $11.6 million. The net operating loss
carryforwards are limited to use in varying annual amounts
through 2008.

Deferred tax assets include approximately $5.3 million
representing the tax effect of transfer pricing adjustments that
have not been deducted in the U.S. pending agreement with the
Internal Revenue Service regarding the final computation of tax
liability for 1986 to 1994.

At December 31, 2001, cumulative undistributed earnings of
LCI were $983.9 million. No provision for U.S. income taxes
or Canadian withholding taxes has been made since the company
considers the undistributed earnings to be permanently invested
in Canada. Management has decided that the determination of the
amount of any unrecognized deferred tax liability for the
cumulative undistributed earnings of LCI is not practical to
determine since it would depend on a number of factors that
cannot be known until such time as a decision to repatriate the
earnings might be made.

Segment and Related Information

Segment information is presented in accordance with SFAS
No. 131, Disclosures about Segments of an Enterprise
and Related Information, which establishes standards for
reporting information about operating segments in annual
financial statements and requires selected information about
operating segments in interim financial reports issued to
shareholders. It also establishes standards for related
disclosures about products and geographic areas.

Lafarges two geographic areas consist of the U.S. and
Canada for which it reports revenues, EBIT (Earnings Before
Minority Interests, Interest and Income Taxes) and fixed assets.

74



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Revenues from the major products sold to external customers
include: cement, ready-mixed concrete, aggregate, asphalt and
paving, gypsum drywall, and other miscellaneous products.

Operating segments are defined as components of an enterprise
that engage in business activities that earn revenues, incur
expenses and prepare separate financial information that is
evaluated regularly by the companys chief operating
decision makers in order to allocate resources and assess
performance.

Lafarges three reportable operating segments, which
represent separately managed strategic business units that have
different capital requirements and marketing strategies, are
construction materials, cement and cement-related products, and
gypsum. Construction materials produces and distributes
construction aggregate, ready-mixed concrete, other concrete
products (gravity and pressure pipe, precast structures, pavers
and masonry units) and asphalt, and also constructs and paves
roads. Cement and cement-related products produces Portland,
masonry and mortar cements, as well as slag, and distributes
silica fume and fly ash. It also includes Systech Environmental
Corporation, a subsidiary that supplies fuel-quality waste and
raw materials to cement kilns. Gypsum produces drywall for the
commercial and residential construction sectors.

The accounting policies of the operating segments are described
in Accounting and Financial Reporting Policies.
Lafarge evaluates operating performance based on profit or loss
from operations before the following items: other
postretirement benefit expense for retirees, goodwill
amortization related to the Redland acquisition, minority
interests, interest, income taxes and foreign exchange gains and
losses.

Lafarge accounts for intersegment sales and transfers at market
prices. Revenues are attributed to geographic areas based on the
location of the assets producing the revenues. Operating segment
information consists of the following (in millions):

|           |                                     |                                  |                 |        |         |         |  |        |         |         |  |        |         |         | 
|---------- | ----------------------------------- | -------------------------------- | --------------- | ------ | ------- | ------- |  | ------ | ------- | ------- |  | ------ | ------- | ------- | 
|           |                                     |                                 
|           |                                     | Years Ended December 31         
|           |                                     |                                 
|           |                                     | 2001                             |                 | 2000   |         | 1999   
|           |                                     |                                  |                 |        |         |        
|Net sales: |                                     |                                  |                 |        |         |         |  |        |         |         |  |       
|          
|          
|          
|          
|           | Construction materials:             |                                  |                 |        |         |         |  |        |         |         |  |        |        
|          
|          
|          
|          
|           |                                     | Revenues from external customers |                 | $      | 2,073.8 |         |  | $      | 1,575.4 |         |  | $      | 1,483.7 |        
|          
|          
|          
|          
|           |                                     | Intersegment revenues            |                 |        |        |         |  |        | 0.3     |         |  |        | 2.7     |        
|          
|          
|          
|          
|           | Cement and cement-related products: |                                  |                 |        |         |         |  |        |         |         |  |        |        
|          
|          
|          
|          
|           |                                     | Revenues from external customers |                 |        | 1,096.8 |         |  |        | 1,078.1 |         |  |        | 1,085.4 |        
|          
|          
|          
|          
|           |                                     | Intersegment revenues            |                 |        | 141.6   |         |  |        | 137.3   |         |  |        | 117.4   |        
|          
|          
|          
|          
|           | Gypsum:                             |                                  |                 |        |         |         |  |        |         |         |  |        |        
|          
|          
|          
|          
|           |                                     | Revenues from external customers |                 |        | 152.4   |         |  |        | 134.1   |         |  |        | 152.5   |        
|          
|          
|          
|          
|           | Eliminations                        |                                  |                 | (141.6 | )       |         |  | (137.6 | )       |         |  | (120.1 | )      
|           |                                     |                                  |                 |        |         |         |  |        |         |         |  |       
|           |                                     |                                  | Total net sales |        | $       | 3,323.0 |  |        | $       | 2,787.6 |  |        | $       | 2,721.6 | 
|           |                                     |                                  |                 |        |         |         |  |        |         |         |  |       

75



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

|                               |                                                                |                              |   |       |       |      |   |       |       |  |   |       |       | 
|------------------------------ | -------------------------------------------------------------- | ---------------------------- | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                               |                                                                |                             
|                               |                                                                | Years Ended December 31     
|                               |                                                                |                             
|                               |                                                                | 2001                         |   | 2000  |       | 1999
|                               |                                                                |                              |   |       |       |     
|Income (loss) from operations: |                                                                |                              |   |       |       |      |   |       |       |  |   |      
|                              
|                              
|                              
|                              
|                               | Construction materials (a)                                     |                              | $ | 235.6 |       |      | $ | 192.1 |       |  | $ | 189.5 |      
|                              
|                              
|                              
|                              
|                               | Cement and cement-related products (a)                         |                              |   | 313.9 |       |      |   | 318.3 |       |  |   | 320.5 |      
|                              
|                              
|                              
|                              
|                               | Gypsum (a)                                                     |                              |   | (69.4 | )     |      |   | (18.0 | )     |  |   | 41.9  |      
|                               |                                                                |                              |   |       |       |      |   |       |       |  |   |      
|                               | Total                                                          |                              |   | 480.1 |       |      |   | 492.4 |       |  |   | 551.9 |      
|                              
|                              
|                              
|                              
|                               | Corporate and unallocated expenses                             |                              |   | (79.0 | )     |      |   | (61.7 | )     |  |   | (70.3 | )    
|                               |                                                                |                              |   |       |       |      |   |       |       |  |   |      
|                               | Earnings before minority interests, interest and
	income taxes |                              |   | 401.1 |       |      |   | 430.7 |       |  |   | 481.6 |      
|                              
|                              
|                              
|                              
|                               | Minority interests                                             |                              |   | (7.0  | )     |      |   |      |       |  |   |      |      
|                              
|                              
|                              
|                              
|                               | Interest expense, net                                          |                              |   | (47.9 | )     |      |   | (26.9 | )     |  |   | (44.8 | )    
|                               |                                                                |                              |   |       |       |      |   |       |       |  |   |      
|                               |                                                                | Earnings before income taxes |   | $     | 346.2 |      |   | $     | 403.8 |  |   | $     | 436.8 | 
|                               |                                                                |                              |   |       |       |      |   |       |       |  |   |      




|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Excludes other postretirement benefit expense for retirees,
	goodwill amortization related to the Redland acquisition,
	minority interests, interest, income taxes and foreign exchange
	gains and losses.

|        |                                                    |              |   |         |         |      |   |         |         |  |   |         |         | 
|------- | -------------------------------------------------- | ------------ | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|        |                                                    |             
|        |                                                    | December 31 
|        |                                                    |             
|        |                                                    | 2001         |   | 2000    |         | 1999
|        |                                                    |              |   |         |         |     
|Assets: |                                                    |              |   |         |         |      |   |         |         |  |   |        
|       
|       
|       
|       
|        | Construction materials                             |              | $ | 1,701.6 |         |      | $ | 1,664.7 |         |  | $ | 1,239.1 |        
|       
|       
|       
|       
|        | Cement and cement-related products                 |              |   | 1,097.8 |         |      |   | 1,052.1 |         |  |   | 1,098.3 |        
|       
|       
|       
|       
|        | Gypsum                                             |              |   | 260.4   |         |      |   | 279.4   |         |  |   | 125.1   |        
|       
|       
|       
|       
|        | Corporate, Redland goodwill and unallocated assets |              |   | 1,057.8 |         |      |   | 906.4   |         |  |   | 830.9   |        
|        |                                                    |              |   |         |         |      |   |         |         |  |   |        
|        |                                                    | Total assets |   | $       | 4,117.6 |      |   | $       | 3,902.6 |  |   | $       | 3,293.4 | 
|        |                                                    |              |   |         |         |      |   |         |         |  |   |        

|                      |                                    |                            |   |       |       |      |   |       |       |  |   |       |       | 
|--------------------- | ---------------------------------- | -------------------------- | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                      |                                    |                           
|                      |                                    | Years Ended December 31   
|                      |                                    |                           
|                      |                                    | 2001                       |   | 2000  |       | 1999
|                      |                                    |                            |   |       |       |     
|Capital expenditures: |                                    |                            |   |       |       |      |   |       |       |  |   |      
|                     
|                     
|                     
|                     
|                      | Construction materials             |                            | $ | 126.6 |       |      | $ | 100.8 |       |  | $ | 83.8  |      
|                     
|                     
|                     
|                     
|                      | Cement and cement-related products |                            |   | 152.2 |       |      |   | 172.4 |       |  |   | 162.9 |      
|                     
|                     
|                     
|                     
|                      | Gypsum                             |                            |   | 34.0  |       |      |   | 135.8 |       |  |   | 54.4  |      
|                     
|                     
|                     
|                     
|                      | Corporate and unallocated          |                            |   | 20.4  |       |      |   | 22.7  |       |  |   | 14.6  |      
|                      |                                    |                            |   |       |       |      |   |       |       |  |   |      
|                      |                                    | Total capital expenditures |   | $     | 333.2 |      |   | $     | 431.7 |  |   | $     | 315.7 | 
|                      |                                    |                            |   |       |       |      |   |       |       |  |   |      

|                                          |                                    |                                                 |   |      |       |      |   |      |       |  |   |      |       | 
|----------------------------------------- | ---------------------------------- | ----------------------------------------------- | - | ---- | ----- | ---- | - | ---- | ----- |  | - | ---- | ----- | 
|                                          |                                    |                                                
|                                          |                                    | Years Ended December 31                        
|                                          |                                    |                                                
|                                          |                                    | 2001                                            |   | 2000 |       | 1999
|                                          |                                    |                                                 |   |      |       |     
|Depreciation, depletion and amortization: |                                    |                                                 |   |      |       |      |   |      |       |  |   |     
|                                         
|                                         
|                                         
|                                         
|                                          | Construction materials             |                                                 | $ | 90.4 |       |      | $ | 70.8 |       |  | $ | 78.3 |      
|                                         
|                                         
|                                         
|                                         
|                                          | Cement and cement-related products |                                                 |   | 73.0 |       |      |   | 75.4 |       |  |   | 70.5 |      
|                                         
|                                         
|                                         
|                                         
|                                          | Gypsum                             |                                                 |   | 16.5 |       |      |   | 7.8  |       |  |   | 5.2  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Corporate                          |                                                 |   | 14.3 |       |      |   | 14.3 |       |  |   | 14.3 |      
|                                          |                                    |                                                 |   |      |       |      |   |      |       |  |   |     
|                                          |                                    | Total depreciation, depletion and
	amortization |   | $    | 194.2 |      |   | $    | 168.3 |  |   | $    | 168.3 | 
|                                          |                                    |                                                 |   |      |       |      |   |      |       |  |   |     

76



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Information concerning product net sales was as follows (in
millions):

|                                   |                                    |                         |   |         |         |      |   |         |         |  |   |         |         | 
|---------------------------------- | ---------------------------------- | ----------------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                   |                                    |                        
|                                   |                                    | Years Ended December 31
|                                   |                                    |                        
|                                   |                                    | 2001                    |   | 2000    |         | 1999
|                                   |                                    |                         |   |         |         |     
|Net sales from external customers: |                                    |                         |   |         |         |      |   |         |         |  |   |        
|                                  
|                                  
|                                  
|                                  
|                                   | Cement and cement-related products |                         | $ | 1,096.8 |         |      | $ | 1,078.1 |         |  | $ | 1,085.4 |        
|                                  
|                                  
|                                  
|                                  
|                                   | Ready-mixed concrete               |                         |   | 664.3   |         |      |   | 636.5   |         |  |   | 584.1   |        
|                                  
|                                  
|                                  
|                                  
|                                   | Aggregate                          |                         |   | 519.0   |         |      |   | 516.7   |         |  |   | 366.7   |        
|                                  
|                                  
|                                  
|                                  
|                                   | Asphalt and paving                 |                         |   | 740.0   |         |      |   | 376.3   |         |  |   | 405.6   |        
|                                  
|                                  
|                                  
|                                  
|                                   | Gypsum drywall                     |                         |   | 152.4   |         |      |   | 134.1   |         |  |   | 152.5   |        
|                                  
|                                  
|                                  
|                                  
|                                   | Other miscellaneous products       |                         |   | 150.5   |         |      |   | 45.9    |         |  |   | 127.3   |        
|                                   |                                    |                         |   |         |         |      |   |         |         |  |   |        
|                                   |                                    | Total net sales         |   | $       | 3,323.0 |      |   | $       | 2,787.6 |  |   | $       | 2,721.6 | 
|                                   |                                    |                         |   |         |         |      |   |         |         |  |   |        

No single customer represented more than 10 percent of
Lafarges revenues.

Information concerning principal geographic areas was as follows
(in millions):

|       |  |                         |         |         |  |        |       |       |  |         |         |        |  |       |         |         |  |        |       |  |  |   |         |  |  |   |         |  |  |   |       |  |  |   |         | 
|------ |  | ----------------------- | ------- | ------- |  | ------ | ----- | ----- |  | ------- | ------- | ------ |  | ----- | ------- | ------- |  | ------ | ----- |  |  | - | ------- |  |  | - | ------- |  |  | - | ----- |  |  | - | ------- | 
|       |  |                        
|       |  | Years Ended December 31
|       |  |                        
|       |  |                         |         |         |  |       
|       |  | 2001                    |         | 2000    |  | 1999  
|       |  |                         |         |         |  |       
|       |  | Net                     |         |         |  | Fixed  |       | Net   |  |         |         | Fixed  |  | Net   |         |         |  | Fixed 
|       |  | Sales                   |         | EBIT(a) |  | Assets |       | Sales |  | EBIT(a) |         | Assets |  | Sales |         | EBIT(a) |  | Assets
|       |  |                         |         |         |  |        |       |       |  |         |         |        |  |       |         |         |  |       
|U.S.   |  | $                       | 2,023.8 |         |  | $      | 203.1 |       |  | $       | 1,458.4 |        |  | $     | 1,904.4 |         |  | $      | 275.9 |  |  | $ | 1,355.7 |  |  | $ | 1,905.1 |  |  | $ | 334.5 |  |  | $ | 1,056.5 | 
|      
|      
|      
|      
|Canada |  |                         | 1,299.2 |         |  |        | 198.0 |       |  |         | 736.7   |        |  |       | 883.2   |         |  |        | 154.8 |  |  |   | 766.7   |  |  |   | 816.5   |  |  |   | 147.1 |  |  |   | 561.8   | 
|       |  |                         |         |         |  |        |       |       |  |         |         |        |  |       |         |         |  |        |       |  |  |   |         |  |  |   |         |  |  |   |       |  |  |   |         | 
|       |  | $                       | 3,323.0 |         |  | $      | 401.1 |       |  | $       | 2,195.1 |        |  | $     | 2,787.6 |         |  | $      | 430.7 |  |  | $ | 2,122.4 |  |  | $ | 2,721.6 |  |  | $ | 481.6 |  |  | $ | 1,618.3 | 
|       |  |                         |         |         |  |        |       |       |  |         |         |        |  |       |         |         |  |        |       |  |  |   |         |  |  |   |         |  |  |   |       |  |  |   |         | 




|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(a) | EBIT represents earnings before minority interests, interest and
	income taxes.

Net sales exclude intersegment revenues.

Supplemental Cash Flow Information

Non-cash investing and financing activities included the
issuance of 109,000, 1,204,000 and 694,000 common equity shares
on the reinvestment of dividends totaling $3.5 million,
$25.3 million and $19.5 million in 2001, 2000 and
1999, respectively. Cash paid for acquisitions in 2000 does not
reflect the Preferred Shares or a $16.7 million note
payable issued in conjunction with the Warren merger. Financing
activities do not reflect the $14.4 million common stock
warrants issued in 2000 for a note receivable.

Cash paid during the year for interest and income taxes was as
follows (in thousands):

|                                      |  |                         |        |      |  |      |         |  |  |   |         | 
|------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                      |  |                        
|                                      |  | Years Ended December 31
|                                      |  |                        
|                                      |  | 2001                    |        | 2000 |  | 1999
|                                      |  |                         |        |      |  |     
|Interest (net of amounts capitalized) |  | $                       | 55,851 |      |  | $    | 56,812  |  |  | $ | 51,202  | 
|                                     
|                                     
|                                     
|                                     
|Income taxes (net of refunds)         |  | $                       | 27,923 |      |  | $    | 161,701 |  |  | $ | 131,946 | 
|                                      |  |                         |        |      |  |      |         |  |  |   |         | 

Pension Plans and Other Postretirement Benefits

The company has several defined benefit and defined contribution
retirement plans covering substantially all employees and
directors. Benefits paid under the defined benefit plans are
generally based on either years of service and the
employees compensation over the last few years of
employment or years of service multiplied by a contractual
amount. The companys funding policy is to contribute
amounts that are deductible for income tax purposes.

77



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

For 2001 and 2000, the assumed settlement interest rates for
pension plans and other postretirement benefits were
7.75 percent for the companys U.S. plans, and
6.50 percent and 6.95 percent, respectively, for the
Canadian plans. For 2001 and 2000, the assumed rates of increase
in future compensation levels used in determining the actuarial
present values of the projected benefit obligations were
4.5 percent for the companys U.S. plans and
3.5 percent for the Canadian plans. The benefit multiplier
increase rate was 2.0 percent for the companys U.S.
hourly plans and 3.5 percent for the Canadian hourly plans.
In both the U.S. and Canada, the expected long-term rate of
investment return on pension assets, which includes listed
stocks, fixed income securities and real estate, was
9.0 percent for each year presented.

The company provides certain retiree health and life insurance
benefits to eligible employees who retire in the U.S. or Canada.
Salaried participants generally become eligible for retiree
health care benefits when they retire from active service at age
55 or later, although there are some variances by plan or unit
in the U.S. and Canada. Benefits, eligibility and cost-sharing
provisions for hourly employees vary by location and/or
bargaining unit. Generally, the health care plans pay a stated
percentage of most medical and dental expenses reduced for any
deductible, copayment and payments made by government programs
and other group coverage. These plans are unfunded. An eligible
retirees health care benefit coverage is coordinated in
Canada with provincial health and insurance plans and in the
U.S., after attaining age 65, with Medicare. Certain retired
employees of businesses acquired by the company are covered
under other health care plans that differ from current plans in
coverage, deductibles and retiree contributions.

In the U.S., salaried retirees and dependents under age 65 have
a $1.0 million health care lifetime maximum benefit. At age
65 or over, the maximum is $50,000. Lifetime maximums for hourly
retirees are governed by the location and/or bargaining
agreement in effect at the time of retirement. In Canada, some
units have maximums, but in most cases there are no lifetime
maximums. In some units in Canada, spouses of retirees have
lifetime medical coverage.

In Canada, both salaried and nonsalaried employees are generally
eligible for postretirement life insurance benefits. In the
U.S., postretirement life insurance is provided for a number of
hourly employees as stipulated in their hourly bargained
agreements, but it is not provided for salaried employees,
except those of certain acquired companies.

The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation differs between
U.S. and Canadian plans. In 2001, the pre-65 assumed rate was
10.0 percent, decreasing to 5.5 percent over
10 years, in the U.S. plan, and 10.2 percent,
decreasing to 4.7 percent over seven years, in the Canadian
plan. In 2000, the pre-65 assumed rate was 7.8 percent,
decreasing to 5.5 percent over six years, for both the U.S.
and Canadian plans. For post-65 retirees in the U.S., the
assumed rate was 10.0 percent, decreasing to
5.5 percent over 10 years, in 2001, and
6.6 percent, decreasing to 5.5 percent over six years,
in 2000, with a Medicare assumed rate for the same group of
10.0 percent, decreasing to 5.5 percent over
10 years, in 2001, and 6.4 percent, decreasing to
5.5 percent over six years, in 2000. For post-65 retirees
in Canada, the assumed rate was 10.2 percent, decreasing to
4.7 percent over seven years, in 2001, and
7.7 percent, decreasing to 5.5 percent over six years,
in 2000.

The following table summarizes the consolidated funded status of
the companys defined benefit retirement plans and other
postretirement benefits and provides a reconciliation to the
consolidated prepaid pension asset, accrued pension liability
and accrued postretirement benefit cost recorded on the
companys Consolidated Balance Sheets at December 31,
2001 and 2000 (in millions).

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

|                                                                       |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |        |  
|---------------------------------------------------------------------- | -------------------------------------- | ---------------- | ---- | ----------------------------- | - | ---- | ---- | ----- | - | ---- | ---- | ----- | - | - | ---- | ------ | - | - | ---- | ------ | - | - | ---- | ------ | -
|                                                                       |                                        |                  |      |                              
|                                                                       |                                        | Pension Benefits |      | Other Postretirement Benefits
|                                                                       |                                        |                  |      |                              
|                                                                       |                                        | 2001             |      | 2000                          |   | 1999 |      | 2001  |   | 2000 |      | 1999 
|                                                                       |                                        |                  |      |                               |   |      |      |       |   |      |      |      
|Amounts recognized in the Statement of Financial
	Position consist of: |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Prepaid asset                          |                  | $    | 138.2                         |   |      | $    | 136.4 |   |      | $    | 101.9 |   |   | $    |       |   |   | $    |       |   |   | $    |       |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Accrued liability                      |                  |      | (49.7                         | ) |      |      | (33.1 | ) |      |      | (29.5 | ) |   |      | (175.4 | ) |   |      | (174.2 | ) |   |      | (153.5 | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Intangible asset                       |                  |      | 2.3                           |   |      |      |      |   |      |      |      |   |   |      |       |   |   |      |       |   |   |      |       |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Accumulated other comprehensive income |                  |      | 20.8                          |   |      |      |      |   |      |      |      |   |   |      |       |   |   |      |       |   |   |      |       |  
|                                                                       |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |       
|                                                                       | Net amount recognized at
	December 31  |                  | $    | 111.6                         |   |      | $    | 103.3 |   |      | $    | 72.4  |   |   | $    | (175.4 | ) |   | $    | (174.2 | ) |   | $    | (153.5 | )
|                                                                       |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |       
|Components of Net Periodic Benefit Cost:                               |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Service cost                           |                  | $    | 20.0                          |   |      | $    | 17.6  |   |      | $    | 20.1  |   |   | $    | 3.3    |   |   | $    | 2.8    |   |   | $    | 2.7    |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Interest cost                          |                  |      | 42.5                          |   |      |      | 37.9  |   |      |      | 35.5  |   |   |      | 11.8   |   |   |      | 11.2   |   |   |      | 10.3   |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Expected return on plan assets         |                  |      | (63.7                         | ) |      |      | (57.1 | ) |      |      | (50.3 | ) |   |      |       |   |   |      |       |   |   |      |       |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Amortization of prior service cost     |                  |      | 0.1                           |   |      |      | 1.6   |   |      |      | 2.7   |   |   |      | (0.6   | ) |   |      | (0.6   | ) |   |      | (1.0   | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Amortization of transition asset       |                  |      | 2.6                           |   |      |      | (1.4  | ) |      |      | (1.5  | ) |   |      |       |   |   |      |       |   |   |      |       |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Amortization of actuarial (gain) loss  |                  |      | (5.0                          | ) |      |      | (5.5  | ) |      |      | 4.4   |   |   |      |       |   |   |      |       |   |   |      | 0.3    |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Settlement                             |                  |      |                              |   |      |      | (0.2  | ) |      |      |      |   |   |      |       |   |   |      |       |   |   |      |       |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Special termination benefits           |                  |      | 4.2                           |   |      |      |      |   |      |      | 2.4   |   |   |      | 0.4    |   |   |      |       |   |   |      |       |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Other                                  |                  |      | (1.3                          | ) |      |      | (1.0  | ) |      |      | (0.4  | ) |   |      |       |   |   |      |       |   |   |      |       |  
|                                                                       |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |       
|Net periodic benefit cost (benefit)                                    |                                        |                  | (0.6 | )                             |   |      | (8.1 | )     |   |      | 12.9 |       |   |   | 14.9 |        |   |   | 13.4 |        |   |   | 12.3 |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Defined contribution plans cost                                        |                                        |                  | 7.8  |                               |   |      | 7.1  |       |   |      | 4.5  |       |   |   |     |        |   |   |     |        |   |   |     |       
|                                                                       |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |       
|Net retirement cost (benefit)                                          |                                        | $                | 7.2  |                               |   | $    | (1.0 | )     |   | $    | 17.4 |       |   | $ | 14.9 |        |   | $ | 13.4 |        |   | $ | 12.3 |       
|                                                                       |                                        |                  |      |                               |   |      |      |       |   |      |      |       |   |   |      |        |   |   |      |        |   |   |      |       

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

|                                                  |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |       |        |  
|------------------------------------------------- | ----------------------------------------- | ---------------------------------- | ----- | -------------- | ----- | ----- | ----- | ----- | ----- | - | ------ | ----- | ------ | - | ------ | ----- | ------ | -
|                                                  |                                           |                                    |       |                |       |      
|                                                  |                                           |                                    |       |                |       | Other
|                                                  |                                           |                                    |       | Postretirement
|                                                  |                                           | Pension Benefits                   |       | Benefits      
|                                                  |                                           |                                    |       |               
|                                                  |                                           | 2001                               |       | 2000           |       | 2001  |       | 2000 
|                                                  |                                           |                                    |       |                |       |       |       |      
|Change in Benefit Obligation:                     |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Projected benefit obligation at January 1 |                                    | $     | 595.9          |       |       | $     | 520.0 |       |   | $      | 167.1 |        |   | $      | 135.5 |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Exchange rate changes              |       |                | (18.1 | )     |       |       | (8.8  | ) |        |       | (2.0   | ) |        |       | (0.7   | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Service cost                       |       |                | 13.5  |       |       |       | 11.1  |   |        |       | 3.3    |   |        |       | 2.8    |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Interest cost                      |       |                | 42.5  |       |       |       | 37.9  |   |        |       | 11.8   |   |        |       | 11.2   |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Employee contributions             |       |                | 2.9   |       |       |       | 2.4   |   |        |       |       |   |        |       |       |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Plan amendments                    |       |                |      |       |       |       | 0.1   |   |        |       |       |   |        |       |       |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Acquisitions                       |       |                |      |       |       |       | 45.6  |   |        |       |       |   |        |       | 17.1   |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Settlement                         |       |                |      |       |       |       | (0.4  | ) |        |       |       |   |        |       |       |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Special termination benefits       |       |                | 4.2   |       |       |       |      |   |        |       | 2.2    |   |        |       |       |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Benefits paid                      |       |                | (40.5 | )     |       |       | (36.7 | ) |        |       | (11.9  | ) |        |       | (9.3   | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Actuarial loss                     |       |                | 23.6  |       |       |       | 24.0  |   |        |       | 22.2   |   |        |       | 10.5   |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Other                              |       |                | 0.1   |       |       |       | 0.7   |   |        |       |       |   |        |       |       |  
|                                                  |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|Projected Benefit Obligation at December
	31      |                                           |                                    | 624.1 |                |       |       | 595.9 |       |       |   | 192.7  |       |        |   | 167.1  |      
|                                                  |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|Change in Plan Assets:                            |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Fair value of plan assets at January 1    |                                    |       | 748.5          |       |       |       | 705.8 |       |   |        |       |        |   |        |       |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Exchange rate changes              |       |                | (17.7 | )     |       |       | (10.3 | ) |        |       |        |   |        |       |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Actual return on plan assets       |       |                | (78.5 | )     |       |       | 24.9  |   |        |       |        |   |        |       |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Acquisitions                       |       |                |      |       |       |       | 55.2  |   |        |       |        |   |        |       |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Employer contributions             |       |                | 4.2   |       |       |       | 9.2   |   |        |       |        |   |        |       |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Employee contributions             |       |                | 2.9   |       |       |       | 2.3   |   |        |       |        |   |        |       |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Benefits paid                      |       |                | (40.5 | )     |       |       | (36.7 | ) |        |       |        |   |        |       |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Settlement                         |       |                |      |       |       |       | (0.4  | ) |        |       |        |   |        |       |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Administrative expenses            |       |                | (3.2  | )     |       |       | (1.5  | ) |        |       |        |   |        |       |        |  
|                                                  |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|Fair Value of Plan Assets at
	December 31         |                                           |                                    | 615.7 |                |       |       | 748.5 |       |       |   |        |       |        |   |        |      
|                                                  |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|Reconciliation of Prepaid (Accrued) Benefit Cost: |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Funded status                      |       |                | (8.4  | )     |       |       | 152.6 |   |        |       | (192.7 | ) |        |       | (167.1 | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Unrecognized actuarial loss (gain) |       |                | 112.2 |       |       |       | (58.3 | ) |        |       | 17.9   |   |        |       | (5.9   | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Unrecognized transition asset      |       |                | 5.8   |       |       |       | 7.0   |   |        |       |       |   |        |       |       |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                           | Unrecognized prior service cost    |       |                | 2.0   |       |       |       | 2.0   |   |        |       | (0.6   | ) |        |       | (1.2   | )
|                                                  |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      
|Prepaid (Accrued) Benefit Cost at
	December 31    |                                           | $                                  | 111.6 |                |       | $     | 103.3 |       |       | $ | (175.4 | )     |        | $ | (174.2 | )    
|                                                  |                                           |                                    |       |                |       |       |       |       |       |   |        |       |        |   |        |      

As of December 31, 2001, the company recorded a minimum
pension liability of $23.1 million related to the
accumulated benefit obligation in excess of the fair value of
the plan assets and a $2.3 million intangible asset
reflecting the portion of the minimum liability generated from
unamortized prior service costs. The remaining
$20.8 million of the minimum liability was recorded as
accumulated other comprehensive loss in

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

the Consolidated Balance Sheets and in the Consolidated
Statements of Shareholders Equity, net of income taxes of
$7.6 million.

The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for the pension plans with
accumulated benefit obligations in excess of plan assets were
$128.9 million, $117.6 million and $68.6 million
respectively, as of December 31, 2001, and
$49.8 million, $43.5 million and $7.4 million,
respectively, as of December 31, 2000.

In 2001, a $1.3 million special termination charge was
incurred for pension enhancements triggered when affected
employees at the Sugar Creek, Missouri cement plant accepted
enhanced pension benefits negotiated in connection with
severance arrangements related to the new cement line at the
plant. Additionally, the company incurred a $2.9 million
special termination charge upon the retirement of its President
and Chief Executive Officer in May 2001. Similarly, in 1999, the
company divested the paving and asphalt division of Redland
Genstar, Inc. through a series of sales, which triggered a
$2.4 million one-time charge for contractual termination
benefits provided to a select group of employees in the divested
operations. These termination benefits provided were an
immediate unreduced early retirement pension and a monthly
Social Security Bridge payment. In conjunction with the Sugar
Creek severance arrangements, special postretirement benefits
were provided to employees, which increased the other
postretirement projected benefit obligation by
$2.2 million, increased net periodic benefit cost by
$0.4 million and increased unrecognized actuarial loss by
$1.8 million for the year ended December 31, 2001.

Certain employees are also covered under multi-employer pension
plans administered by unions. Amounts included in the preceding
table as defined benefit plans retirement cost include
contributions to such plans of $6.5 million for 2001, 2000
and 1999. The data available from administrators of the
multi-employer plans are not sufficient to determine the
accumulated benefit obligation or the net assets attributable to
these plans.

The defined contribution plans cost in the preceding table
relates to thrift savings plans for eligible U.S. and Canadian
employees. Under the provisions of these plans, the company
matches a portion of each participants contribution.

Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plans. A
one-percentage-point increase or decrease in assumed health care
cost trend rates would have the following effects (stated in
millions of dollars):

|                                                                                   |  |                      |      |          |  |   |       |  
|---------------------------------------------------------------------------------- |  | -------------------- | ---- | -------- |  | - | ----- | -
|                                                                                   |  |                     
|                                                                                   |  | One-percentage-point
|                                                                                   |  |                     
|                                                                                   |  | Increase             |      | Decrease
|                                                                                   |  |                      |      |         
|Increase (decrease) in postretirement
	benefit obligation at
	December 31, 2001    |  | $                    | 13.6 |          |  | $ | (12.3 | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Increase (decrease) in the total of service
	and interest cost components for 2001 |  | $                    | 1.2  |          |  | $ | (1.1  | )

Commitments and Contingencies

The company leases certain land, buildings and equipment. Total
rental expenses under operating leases was $34.6 million,
$24.6 million and $16.1 million for each of the three
years ended December 31, 2001, 2000 and 1999, respectively.
The table below shows the future minimum lease payments (in
millions) due under noncancelable operating leases at
December 31, 2001. Such payments total $154.7 million.

|                 |  |                          |      |      |  |      |      |      |  |      |      |             |  |  |      |  |  |  |      |  |  |  |      | 
|---------------- |  | ------------------------ | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ----------- |  |  | ---- |  |  |  | ---- |  |  |  | ---- | 
|                 |  |                         
|                 |  | Years Ending December 31
|                 |  |                         
|                 |  | 2002                     |      | 2003 |  | 2004 |      | 2005 |  | 2006 |      | Later Years
|                 |  |                          |      |      |  |      |      |      |  |      |      |            
|Operating leases |  |                          | 32.8 |      |  |      | 28.3 |      |  |      | 19.3 |             |  |  | 13.7 |  |  |  | 10.9 |  |  |  | 49.7 | 

81



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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

The company has entered into supply agreements for the
procurement of synthetic gypsum, which is utilized in the
production process at its Silver Grove, Kentucky and Palatka,
Florida gypsum drywall plants. The agreements call for minimum
annual purchases over a 20-year period ending in 2020. The
present value of these commitments approximates $87 million
at December 31, 2001.

The company self-insures for workers compensation,
automobile and general liability claims up to a maximum per
claim. The undiscounted estimated liability is accrued based on
a determination by an outside actuary. This determination is
impacted by assumptions made and actual experience, and could
change in the future.

On March 28, 2001, Dunn Industrial Group, Inc. (Dunn
Industrial) filed a lawsuit against the company and the
City of Sugar Creek, Missouri in the Circuit Court of Jackson
County, Missouri at Kansas City. In the suit, Dunn Industrial,
the general contractor for the construction of the
companys new cement plant in Sugar Creek, Missouri,
alleges that the company expanded the scope of work expected of
Dunn Industrial in the construction of the plant without
commensurate increases in time required for performance and
amounts to be paid to Dunn Industrial. In connection therewith,
the suit alleges breach of contract, quantum meruit, breach of
warranty and negligent misrepresentation and seeks foreclosure
of mechanics liens against the company and the City of
Sugar Creek, Missouri. Dunn Industrial appears to be seeking in
excess of $67 million in damages. The amount of the
companys liability in connection with this suit remains
uncertain. To date, the trial court has considered only whether
issues raised by Dunn Industrial must be arbitrated rather than
litigated. The company has appealed the trial courts
ruling that Dunn Industrial may proceed without first seeking
arbitration, on which ruling the appellate court has yet to
rule. The company intends to vigorously defend the suit.

In June 2001, LCI paid Canadian $15.6 million
(approximately U.S. $10 million) in capital and interest,
representing its share of the damages awarded to the plaintiffs
in a lawsuit originating in 1992 (the 1992 lawsuit)
arising from claims of building owners, the Ontario New Home
Warranty Program and other plaintiffs regarding defective
concrete foundations. Earlier in 2001, the Ontario Court of
Appeal had confirmed the decision of the trial court, which had
attributed to LCI 80 percent of the liability for the
damages incurred by the plaintiffs on the basis that the
problems in the concrete foundations were caused by a product
supplied by LCI. The Supreme Court of Canada refused to hear
LCIs appeal. The company believes its insurance coverage
(on which the Court of Appeal has yet to rule) will cover most
of the damages paid to the plaintiffs, as well as a large part
of the defense expenses and third party costs arising from the
1992 lawsuit. The company has already expensed or taken reserves
for the amounts not expected to be paid by its insurers. LCI is
also involved as a defendant in a related class action initiated
in 1999. Approximately 215 homeowners have joined in the class
action as potential claimants. Although the outcome of any
liability related to the 1999 class action cannot be predicted
with certainty, the company believes that any liability that LCI
may incur arising from the class action will not have a material
adverse effect on its financial condition.

Currently, the company is involved in one remediation under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, which together are referred to as
Superfund, and the corrective action provisions of the Resource
Conservation and Recovery Act of 1976. At this site, which the
U.S. Environmental Protection Agency (EPA) has
listed on the National Priority List, some of the potentially
responsible parties named by the EPA have initiated a
third-party action against 47 parties, including the company.
The company also has been named a potentially responsible party
for this site. The suit alleges that in 1969 one of the
companys predecessor companies sold equipment containing
hazardous substances that may now be present at the site. It
appears that the largest disposer of hazardous substances at
this new site is the U.S. Department of Defense. We understand
that the Department of Defense has accepted a substantial share
of responsibility for the sites remediation and is
pursuing a remediation plan with the EPA. The suit has

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

otherwise been dormant for several years. The company believes
that this matter will not have a material impact on its
financial condition.

When the company determines that it is probable that a liability
for environmental matters or other legal actions has been
incurred and the amount of the loss is reasonably estimable, an
estimate of the required remediation costs is recorded as a
liability in the financial statements. As of December 31, 2001,
the liabilities recorded for the environmental obligations are
not material to the companys financial statements.
Although the company believes its environmental accruals are
adequate, environmental costs may be incurred that exceed the
amounts provided at December 31, 2001. However, the company
has concluded that the possibility of material liability in
excess of the amount reported in the December 31, 2001
Consolidated Balance Sheet is remote.

In the ordinary course of business, the company is involved in
certain legal actions and claims, including proceedings under
laws and regulations relating to environmental and other
matters. Because such matters are subject to many uncertainties
and the outcomes are not predictable with assurance, the total
amount of these legal actions and claims cannot be determined
with certainty. Management believes that all legal and
environmental matters will be resolved without material adverse
impact to the companys financial condition, results of
operations or liquidity.

Related Party Transactions

Included in other income, net for the year ended
December 31, 2001 is $5.6 million of revenue recorded
under the provisions of the Blue Circle Asset Management
Agreement. The agreement also provides for reimbursement of
costs incurred by the company on the behalf of Blue Circle North
America. For the year ended December 31, 2001, the company
had charged Blue Circle North America. $4.1 million for
cost reimbursement. In July 2001, the company purchased for
$14.3 million certain of Blue Circle Industries PLCs
North American assets from Lafarge S.A. that are not part of the
asset management agreement.

The company is a participant to agreements with Lafarge S.A. for
the sharing of certain costs incurred for marketing, technical,
research and managerial assistance and for the use of certain
trademarks. The net expenses accrued for these services were
$5.8 million, $6.1 million and $7.0 million
during 2001, 2000 and 1999, respectively. In addition, the
company purchases various products from and sells various
products to Lafarge S.A. Such purchases totaled
$52.2 million, $67.7 million and $68.5 million in
2001, 2000 and 1999, respectively; such sales totaled
$2.4 million, $1.8 million and 2.2 million in 2001,
2000 and 1999, respectively. Management believes all
transactions the company conducted with Lafarge S.A. were
conducted on an arms-length basis.

In 2000, Lafarge S.A. reinvested a portion of dividends it was
entitled to receive on Common Stock and Exchangeable Shares
amounting to $22.8 million.

The company purchases products from and sells products to
certain of its unconsolidated subsidiaries. Such purchases
totaled $33.3 million in 2001, $25.8 million in 2000
and $35.6 million in 1999; such sales totaled $43.3 million
in 2001, $19.7 million in 2000 and $17.0 million in
1999. The company also received dividends from certain of these
affiliates of $2.1 million and $6.5 million in 2001
and 2000, respectively. Management believes all transactions
with the companys affiliates were conducted on an
arms-length basis.

In conjunction with the Warren merger, a subsidiary of the
company issued the Preferred Shares to KVN (see Note 8), on
which cash dividends amounting to $7.0 million were paid in
2001. KVN is 100 percent owned by a member of the
companys board of directors, his family and certain family
trusts.

The company provides certain officers and employees housing
assistance loans, which generally do not bear interest. At
December 31, 2001 and 2000, amounts outstanding under these
loan agreements totaled $6.6 million and $5.1 million,
respectively.

83



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##### Table of Contents



LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)

Quarterly Data (unaudited)

The following table summarizes financial data by quarter for
2001 and 2000 (in millions, except per share information):

|                                                     |         |       |       |        |   |       |      |        |  |       |       |      |  |   |      |      |  |   |       |      | 
|---------------------------------------------------- | ------- | ----- | ----- | ------ | - | ----- | ---- | ------ |  | ----- | ----- | ---- |  | - | ---- | ---- |  | - | ----- | ---- | 
|                                                     |         | First |       | Second |   | Third |      | Fourth |  | Total
|                                                     |         |       |       |        |   |       |      |        |  |      
|2001                                                 |         |       |       |        |   |       |      |        |  |       |       |      |  |   |      |      |  |   |       |     
|                                                    
|                                                    
|                                                    
|                                                    
|Net sales                                            |         | $     | 444   |        |   | $     | 930  |        |  | $     | 1,140 |      |  | $ | 809  |      |  | $ | 3,323 |     
|                                                    
|                                                    
|                                                    
|                                                    
|Gross profit                                         |         |       | (9    | )      |   |       | 213  |        |  |       | 298   |      |  |   | 214  |      |  |   | 716   |     
|                                                    
|                                                    
|                                                    
|                                                    
|Net income (loss)                                    |         |       | (66   | )      |   |       | 87   |        |  |       | 131   |      |  |   | 82   |      |  |   | 234   |     
|Net income (loss) per common equity
	share (a)       |         |       |       |        |   |       |      |        |  |       |       |      |  |   |      |      |  |   |       |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Basic   |       |       | (0.92  | ) |       |      | 1.20   |  |       |       | 1.83 |  |   |      | 1.14 |  |   |       | 3.25 | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Diluted |       |       | (0.92  | ) |       |      | 1.19   |  |       |       | 1.80 |  |   |      | 1.12 |  |   |       | 3.21 | 
|                                                     |         |       |       |        |   |       |      |        |  |       |       |      |  |   |      |      |  |   |       |     
|2000                                                 |         |       |       |        |   |       |      |        |  |       |       |      |  |   |      |      |  |   |       |     
|                                                    
|                                                    
|                                                    
|                                                    
|Net sales                                            |         | $     | 438   |        |   | $     | 775  |        |  | $     | 924   |      |  | $ | 651  |      |  | $ | 2,788 |     
|                                                    
|                                                    
|                                                    
|                                                    
|Gross profit                                         |         |       | 35    |        |   |       | 231  |        |  |       | 273   |      |  |   | 149  |      |  |   | 688   |     
|                                                    
|                                                    
|                                                    
|                                                    
|Net income (loss)                                    |         |       | (25   | )      |   |       | 96   |        |  |       | 127   |      |  |   | 59   |      |  |   | 257   |     
|                                                    
|                                                    
|                                                    
|                                                    
|Net income (loss) per common equity share
	(a) Basic |         |       | (0.34 | )      |   |       | 1.30 |        |  |       | 1.73  |      |  |   | 0.81 |      |  |   | 3.51  |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Diluted |       |       | (0.34  | ) |       |      | 1.30   |  |       |       | 1.72 |  |   |      | 0.81 |  |   |       | 3.51 | 
|                                                     |         |       |       |        |   |       |      |        |  |       |       |      |  |   |      |      |  |   |       |     




|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The sum of these amounts may not equal the annual amount because
	of changes in the average number of common equity shares
	outstanding during the year.

84



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##### Table of Contents



Schedule II

LAFARGE NORTH AMERICA AND SUBSIDIARIES

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS


Years Ended December 31, 2001, 2000 and 1999


(in thousands)


|                                                                 |                               |              |  |             |        |              |  |          |        |                |  |   |         |   |  |   |      |   |  |   |        | 
|---------------------------------------------------------------- | ----------------------------- | ------------ |  | ----------- | ------ | ------------ |  | -------- | ------ | -------------- |  | - | ------- | - |  | - | ---- | - |  | - | ------ | 
|                                                                 |                               |              |  |             |        |              |  |         
|                                                                 |                               |              |  | Additions   |        | Deductions   |  |         
|                                                                 |                               |              |  |             |        |              |  |         
|                                                                 |                               |              |  |             |        | From Reserve |  |          |        |               
|                                                                 |                               |              |  |             |        | for Purposes |  |          |        |               
|                                                                 |                               | Balance at   |  | Charge to   |        | for Which    |  |          |        |               
|                                                                 |                               | Beginning of |  | Cost and    |        | Reserve Was  |  |          |        | Balance at End
|Descriptions                                                     |                               | Year         |  | Expenses(2) |        | Created      |  | Other(1) |        | of Year       
|                                                                 |                               |              |  |             |        |              |  |          |        |               
|Reserve applicable to current receivable For
	doubtful accounts: |                               |              |  |             |        |              |  |          |        |                |  |   |         |   |  |   |      |   |  |  
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                               | 2001         |  | $           | 25,630 |              |  | $        | 6,106  |                |  | $ | (2,358  | ) |  | $ | (480 | ) |  | $ | 28,898 | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                               | 2000         |  | $           | 24,632 |              |  | $        | 2,451  |                |  | $ | (1,195  | ) |  | $ | (258 | ) |  | $ | 25,630 | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                               | 1999         |  | $           | 24,619 |              |  | $        | 2,490  |                |  | $ | (2,858  | ) |  | $ | 381  |   |  | $ | 24,632 | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | For cash and other discounts: |              |  |             |        |              |  |          |        |                |  |   |         |   |  |   |      |   |  |   |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                               | 2001         |  | $           | 1,799  |              |  | $        | 27,139 |                |  | $ | (24,015 | ) |  | $ | (96  | ) |  | $ | 4,827  | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                               | 2000         |  | $           | 3,040  |              |  | $        | 32,550 |                |  | $ | (33,707 | ) |  | $ | (84  | ) |  | $ | 1,799  | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                               | 1999         |  | $           | 3,232  |              |  | $        | 44,211 |                |  | $ | (43,735 | ) |  | $ | (668 | ) |  | $ | 3,040  | 




|    |                                                               
|--- | --------------------------------------------------------------
|(1) | Primarily foreign currency translation adjustments.           
|   
|(2) | Cash and other discounts are recorded as a reduction to sales.






|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
	AND FINANCIAL DISCLOSURE.

None.

85



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##### Table of Contents



PART III




Item 10.     DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY

The section captioned Item 1  Election of
Directors in our Proxy Statement for the 2002 Annual
Meeting of Stockholders sets forth certain information with
respect to the directors and nominees for election as directors
of the company and is incorporated herein by reference. Pursuant
to General Instruction G (3) of Form 10-K and
Instruction 3 to Item 401 (b) of
Regulation S-K, certain information with respect to persons
who are or may be deemed to be executive officers of the company
is set forth under the caption Executive Officers of the
Company in Part I of this Annual Report.




Item 11.     EXECUTIVE
COMPENSATION

The section captioned Executive Compensation in our
Proxy Statement for the 2002 Annual Meeting of Stockholders sets
forth certain information with respect to the compensation of
management of the company and is incorporated herein by
reference.




Item 12.     SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The section captioned Stock Ownership in our Proxy
Statement for the 2002 Annual Meeting of Stockholders sets forth
certain information with respect to the ownership of our
securities and is incorporated herein by reference.




Item 13.     CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

The sections captioned Executive Compensation 
Compensation Committee Interlocks and Insider
Participation, Certain Relationships and Related
Transactions  Indebtedness of Management and
Certain Relationships and Related Transactions 
Transactions with Management and Others in our Proxy
Statement for the 2002 Annual Meeting of Stockholders set forth
certain information with respect to relations of and
transactions by management of the company and are incorporated
herein by reference.

86



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##### Table of Contents



PART IV




Item 14.     EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



| |         |                                                                                                                                                                                                                                                                                                                              
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)  1. | FINANCIAL STATEMENTS  The financial statements listed
	in the accompanying Index to Consolidated Financial Statements
	and Financial Statement Schedule are filed as part of this
	Annual Report and such Index to Consolidated Financial
	Statements and Financial Statement Schedule is incorporated
	herein by reference.



| |    |                                                                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | FINANCIAL STATEMENT SCHEDULES  The financial
	statement schedule listed in the accompanying Index to
	Consolidated Financial Statements and Financial Statement
	Schedule is filed as part of this Annual Report and such Index
	to Consolidated Financial Statements and Financial Statement
	Schedule is incorporated herein by reference.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULE


|                                   |                                                                                                                     |      |  |    | 
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|                                   |                                                                                                                     | Page
|                                   |                                                                                                                     |     
|Financial Report:                  |                                                                                                                     |      |  |   
|                                  
|                                  
|                                  
|                                  
|                                   | Report of Independent Public Accountants, Arthur
	Andersen LLP                                                      |      |  | 52 | 
|                                  
|                                  
|                                  
|                                  
|Consolidated Financial Statements: |                                                                                                                     |      |  |   
|                                  
|                                  
|                                  
|                                  
|                                   | Consolidated Balance Sheets as of
	December 31, 2001 and 2000                                                       |      |  | 53 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Consolidated Statements of Income for the Years
	Ended December 31, 2001, 2000 and 1999                             |      |  | 54 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Consolidated Statements of Shareholders
	Equity for the Years Ended December 31, 2001, 2000 and 1999               |      |  | 55 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Consolidated Statements of Comprehensive Income
	for the Years Ended December 31, 2001, 2000 and 1999               |      |  | 56 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999                         |      |  | 57 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Notes to Consolidated Financial Statements                                                                          |      |  | 58 | 
|                                  
|                                  
|                                  
|                                  
|Financial Statement Schedule:      |                                                                                                                     |      |  |   
|                                  
|                                  
|                                  
|                                  
|                                   | Schedule II  Consolidated
	Valuation and Qualifying Accounts for the Years Ended
	December 31, 2001, 2000 and 1999 |      |  | 85 | 
|                                   | All other schedules are omitted because they are
	not applicable.                                                   |      |  |    | 



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. | EXHIBITS  The exhibits listed on the accompanying
	List of Exhibits are filed as part of this Annual Report and
	such List of Exhibits is incorporated herein by reference.

|        |     |                        |  |                                                                                                                                                                                                                                                                                                                                                                          
|------- | --- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |                       
|Number  |     | Description of Exhibit
|        |     |                       
|        | 3.1 |                        |  | Articles of Amendment and Restatement of the
	company, filed May 29, 1992, as amended by the Articles of
	Amendment of the company dated May 8, 2001 [incorporated by
	reference to Exhibit 3.1 to the Annual Report on
	Form 10-K filed by the company for the fiscal year ended
	December 31, 2000].                                                                   
|        | 3.2 |                        |  | Amended By-Laws of the company, amended on
	October 15, 2000 [incorporated by reference to
	Exhibit 3.2 to the Annual Report on Form 10-K filed by
	the company for the fiscal year ended December 31, 2000].                                                                                                                                                            
|        | 4.1 |                        |  | Form of Indenture dated as of October 1,
	1989 between the company and Citibank, N.A., as Trustee,
	relating to $250 million of debt securities of the company
	[incorporated by reference to Exhibit 4.1 to the
	Registration Statement on Form S-3 (Registration
	No. 33-31333) of the company, filed with the Securities and
	Exchange Commission on October 3, 1989].
|        | 4.2 |                        |  | Form of Fixed Rate Medium-Term Note of the
	company [incorporated by reference to Exhibit 4.2 to the
	Registration Statement on Form S-3 (Registration
	No. 33-31333) of the company, filed with the Securities and
	Exchange Commission on October 3, 1989].                                                                                                            

87



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|        |       |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ----- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 4.3   |                        |  | Instruments with respect to long-term debt which
	do not exceed 10 percent of the total assets of the company
	and its consolidated subsidiaries have not been filed. The
	company agrees to furnish a copy of such instruments to the
	Commission upon request.                                                                                                                                                                                                                                                       
|        | 9.1   |                        |  | Trust Agreement dated as of October 13, 1927
	among Canada Cement Company Limited, Montreal Trust Company,
	Henry L. Doble and Alban C. Bedford-Jones, as amended
	(composite copy) [incorporated by reference to Exhibit 10.5
	to the Registration Statement on Form S-1 (Registration
	No. 2-82548) of the company, filed with the Securities and
	Exchange Commission on March 21, 1983].                                                                                                                           
|        | 9.2   |                        |  | Amendment dated June 10, 1983 to Trust
	Agreement filed as Exhibit 9.1 [incorporated by reference
	to Exhibit 9.2 to the Registration Statement of
	Form S-1 (Registration No. 2-86589) of the company,
	filed with the Securities and Exchange Commission on
	September 16, 1983].                                                                                                                                                                                                                                    
|        | 10.1  |                        |  | Exchange Agency and Trust Agreement dated as of
	May 1, 1983 among the company, Canada Cement Lafarge,
	Lafarge Coppee and Montreal Trust Company, as trustee
	[incorporated by reference to Exhibit 10.1 to Amendment
	No. 1 to the Registration Statement on Form S-1
	(Registration No. 2-82548) of the company, filed with the
	Securities and Exchange Commission on May 5, 1983]. Canada
	Cement Lafarge changed its name in 1988 to Lafarge Canada Inc.
	Lafarge Coppee changed its name in 1995 to Lafarge S.A.
|        | 10.2  |                        |  | Guarantee Agreement dated as of May 1, 1983
	between the company and Canada Cement Lafarge [incorporated by
	reference to Exhibit 10.2 to Amendment No. 1 to the
	Registration Statement of Form S-1 (Registration
	No. 2-82548) of the company, filed with the Securities and
	Exchange Commission on May 5, 1983].                                                                                                                                                                                                   
|        | 10.3  |                        |  | Special Surface Lease dated as of August 1,
	1954 between the Province of Alberta and Canada Cement Lafarge,
	as amended [incorporated by reference to Exhibit 10.3 to
	the Registration Statement on Form S-1 (Registration
	No. 2-82548) of the company, filed with the Securities and
	Exchange Commission on March 21, 1983].                                                                                                                                                                                      
|        | 10.4  |                        |  | Director Fee Deferral Plan of the company
	[incorporated by reference to Exhibit 10.21 to the
	Registration Statement on Form S-1 (Registration
	No. 2-86589) of the company, filed with the Securities and
	Exchange Commission on September 16, 1983].                                                                                                                                                                                                                                                               
|        | 10.5  |                        |  | 1993 Stock Option Plan of the company, as amended
	and restated February 7, 1995 [incorporated by reference to
	Exhibit 10.5 to the Annual Report on Form 10-K filed
	by the company for the fiscal year ended December 31, 1997].                                                                                                                                                                                                                                                                                     
|        | 10.6  |                        |  | 1983 Stock Option Plan of the company, as amended
	and restated May 2, 1989 [incorporated by reference to
	Exhibit 28 to our report on Form 10-Q for the quarter
	ended June 30, 1989].                                                                                                                                                                                                                                                                                                                                
|        | 10.7  |                        |  | Optional Stock Dividend Plan of the company dated
	September 2000 [incorporated by reference to Exhibit 10.7
	to the Annual Report on Form 10-K filed by the company for
	the fiscal year ended December 31, 2000].                                                                                                                                                                                                                                                                                                    
|        | 10.8  |                        |  | Director Fee Deferral Plan of General Portland,
	assumed by the company on January 29, 1988 [incorporated by
	reference to Exhibit 10(g) to the Annual Report on
	Form 10-K filed by General Portland for the fiscal year
	ended December 31, 1980].                                                                                                                                                                                                                                                                   
|        | 10.9  |                        |  | Option Agreement for Common Stock dated as of
	November 1, 1993 between the company and Lafarge Coppee
	[incorporated by reference to Exhibit 10.11 to the Annual
	Report on Form 10-K filed by the company for the fiscal
	year ended December 31, 1993].                                                                                                                                                                                                                                                             
|        | 10.10 |                        |  | Deferred Compensation Program of Canada Cement
	Lafarge [incorporated by reference to Exhibit 10.57 to
	Amendment No. 1 to the Registration Statement on
	Form S-1 (Registration No. 2-86589) of the company,
	filed with the Securities and Exchange Commission on
	November 23, 1983].                                                                                                                                                                                                                               
|        | 10.11 |                        |  | Agreement dated November 8, 1983 between
	Canada Cement Lafarge and Standard Industries Ltd. [incorporated
	by reference to Exhibit 10.58 to Amendment No. 1 to
	the Registration Statement on Form S-1 (Registration
	No. 2-86589) of the company, filed with the Securities and
	Exchange Commission on November 23, 1983].                                                                                                                                                                                          

88



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|        |       |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ----- | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 10.12 |                        |  | Stock Purchase Agreement dated September 17, 1986 between
	the company and Lafarge Coppee, S.A. [incorporated by
	reference to Exhibit B to our report on Form 10-Q for
	the quarter ended September 30, 1986].                                                                                                                                                                                                                              
|        | 10.13 |                        |  | Cost Sharing Agreement dated December 2, 1988 between
	Lafarge Coppee, LCI and the company relating to expenses for
	research and development, strategic planning and human resources
	and communication techniques [incorporated by reference to
	Exhibit 10.42 to the Annual Report on Form 10-K filed
	by the company for the fiscal year ended December 31, 1988].                                                                       
|        | 10.14 |                        |  | Royalty Agreement dated December 2, 1988 between Lafarge
	Coppee, LCI and the company relating to access to the
	reputation, logo and trademarks of Lafarge Coppee [incorporated
	by reference to Exhibit 10.43 to the Annual Report on
	Form 10-K filed by the company for the fiscal year ended
	December 31, 1988].                                                                                                                       
|        | 10.15 |                        |  | Amendment dated January 1, 1993 to Royalty Agreement filed
	as Exhibit 10.14 [incorporated by reference to
	Exhibit 10.21 to the Annual Report on Form 10-K filed
	by the company for the fiscal year ended December 31, 1992].                                                                                                                                                                                                              
|        | 10.16 |                        |  | Description of Nonemployee Director Retirement Plan of the
	company, effective January 1, 1989 [incorporated by
	reference to Exhibit 10.40 to the Annual Report on
	Form 10-K filed by the company for the fiscal year ended
	December 31, 1989].                                                                                                                                                                                           
|        | 10.17 |                        |  | Reimbursement Agreement dated January 1, 1990 between
	Lafarge Coppee and the company relating to expenses for
	Strategic Planning and Communication techniques [incorporated by
	reference to Exhibit 10.41 to the Annual Report on
	Form 10-K filed by the company for the fiscal year ended
	December 31, 1990].                                                                                                                          
|        | 10.18 |                        |  | Amendment dated September 13, 1991 to Cost Sharing
	Agreement filed as Exhibit 10.13 [incorporated by reference
	to Exhibit 10.31 to the Annual Report on Form 10-K
	filed by the company for the fiscal year ended December 31,
	1994].                                                                                                                                                                                                     
|        | 10.19 |                        |  | Receivables Purchase Agreement dated as of October 13, 2001
	among Sierra Bay Receivables, Inc. as Seller, Lafarge North
	America, as Initial Servicer, Blue Ridge Asset Funding
	Corporation, the Liquidity Banks from time to time party hereto
	and Wachovia Bank, N.A. as Agent [incorporated by reference to
	Exhibit 10.1 to the Quarterly Report on Form 10-Q
	filed by the company for the fiscal quarter ended September 30,
	2001].
|        | 10.20 |                        |  | Receivables Sale Agreement dated as of October 13, 2001
	among Lafarge North America and certain of its Subsidiaries, as
	Originators, and Sierra Bay Receivables, Inc. as Buyer
	[incorporated by reference to Exhibit 10.2 to the Quarterly
	Report on Form 10-Q filed by the company for the fiscal
	quarter ended September 30, 2001].                                                                                                   
|        | 10.21 |                        |  | Cost Sharing Agreement dated January 2, 1996 between
	Lafarge Materiaux de Specialties and the company related to
	costs of a new unit established for researching potential
	profitable markets for their respective products in North
	America [incorporated by reference to Exhibit 10.21 to the
	Annual Report on Form 10-K filed by the company for the
	fiscal year ended December 31, 1996].                                          
|        | 10.22 |                        |  | Marketing and Technical Assistance Agreement dated
	October 1, 1996 between Lafarge S.A. and the company
	related to research and development, marketing, strategic
	planning, human resources and communication techniques in
	relation to gypsum activities [incorporated by reference to
	Exhibit 10.22 to the Annual Report on Form 10-K filed
	by the company for the fiscal year ended December 31, 1996].                             
|        | 10.23 |                        |  | Amendment No. 1 to Option Agreement for Common Stock dated
	as of May 2, 2001 between Lafarge North America and Lafarge
	S.A. [incorporated by reference to Exhibit 10.1 to the
	Quarterly Report on Form 10-Q filed by the company for the
	fiscal quarter ended June 30, 2001].                                                                                                                                                            
|        | 10.24 |                        |  | 1998 Stock Option Plan of the company [incorporated by reference
	to Exhibit 4.1 to the Registration Statement on
	Form S-8 (Regulation No. 333-65897) of the company,
	filed with the Securities and Exchange Commission on
	October 20, 1998].                                                                                                                                                                                             
|        | 10.25 |                        |  | Credit Agreement dated as of December 8, 1998 between the
	company and nine separate banking institutions [incorporated by
	reference to Exhibit 10.25 to the Annual Report on
	Form 10-K filed by the company for the fiscal year ended
	December 31, 1998].                                                                                                                                                                                

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|        |       |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ----- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 10.26 |                        |  | Amendment dated August 1, 1998 to Nonemployee Director
        Retirement Plan of the company filed as Exhibit 10.16.
        [incorporated by reference to Exhibit 10.26 to the Annual
        Report on Form 10-K filed by the company for the fiscal
        year ended December 31, 1998].                                                                                                                                                                                                                                                 
|        | 10.27 |                        |  | Non-Employee Directors Deferred Compensation Plan Cash or
        Phantom Stock Investment Options [incorporated by reference to
        Exhibit 10.27 to the Annual Report on Form 10-K filed
        by the company for the fiscal year ended December 31, 2000].                                                                                                                                                                                                                                                                           
|        | 10.28 |                        |  | Commercial Paper Dealer Agreement dated as of March 2, 2001
        between Lafarge North America and Salomon Smith Barney Inc.
        concerning notes to be issued pursuant to an Issuing and Paying
        Agency Agreement dated as of March 2, 2001 between Lafarge
        North America and Citibank, N.A. [incorporated by reference to
        Exhibit 10.28 to the Annual Report on Form 10-K filed
        by the company for the fiscal year ended Dec ember 31,
        2000].                                                  
|        | 10.29 |                        |  | Commercial Paper Dealer agreement dated as of March 2, 2001
        between Lafarge North America and SunTrust Bank concerning notes
        to be issued pursuant to an Issuing and Paying Agency Agreement
        dated as of March 2, 2001 between Lafarge North America and
        Citibank N.A. [incorporated by reference to Exhibit 10.29
        to the Annual Report on Form 10-K filed by the company for
        the fiscal year ended December 31, 2000].                                                                        
|        | 10.30 |                        |  | Commercial Paper Issuing and Paying Agent Agreement dated as of
        March 2, 2001 between Citibank, N.A. and Lafarge North
        America [incorporated by reference to Exhibit 10.30 to the
        Annual Report on Form 10-K filed by the company for the
        fiscal year ended December 31, 2000].                                                                                                                                                                                                                                
|        | 10.31 |                        |  | Credit agreement dated as of March 2, 2001 among Lafarge
        North America as borrower, the initial lenders named therein,
        Citibank, N.A. as administrative agent, Salomon Smith Barney
        Inc. as arranger and Bayerische Landesbank Girozentrale, BNP
        Paribas, SunTrust Bank and Westdeustche Landesbank Girozentrale
        as syndication agents [incorporated by reference to
        Exhibit 10.31 to the Annual Report on Form 10-K filed
        by the company for the fiscal year ended December 31, 2000].
|        | 10.32 |                        |  | Management Agreement dated as of July 11, 2001, by and
        among Lafarge Corporation, Lafarge S.A. and Blue Circle North
        America [incorporated by reference to Exhibit 10.1 to our
        report on Form 10-Q for the quarter ended June 30,
        2001].                                                                                                                                                                                                                                                                       
|        | 10.33 |                        |  | Option Agreement made and entered into as of July 11, 2001
        by and between Lafarge S.A. and Lafarge Corporation
        [incorporated by reference to Exhibit 10.2 to our report on
        Form 10-Q for the quarter ended June 30, 2001].                                                                                                                                                                                                                                                                                             
|*       | 10.34 |                        |  | Supplemental Agreement Regarding Employees and Employee Benefits
        dated as of December 21, 2001 by and among Lafarge North
        America Inc., Lafarge SA and Blue Circle North America.                                                                                                                                                                                                                                                                                                                                              
|        | 10.35 |                        |  | Agreement made and entered into as of the 25th day of April 2001
        by and between Lafarge Corporation and John M. Piecuch
        [incorporated by reference to Exhibit 10.3 to our report on
        Form 10-Q for the quarter ended June 30, 2001].                                                                                                                                                                                                                                                                                    
|        | 10.36 |                        |  | Agreement made and entered into as of the 21st day of May 2001,
        by and among Lafarge Corporation, Lafarge Canada Inc. and Edward
        T. Balfe [incorporated by reference to Exhibit 10.4 to our
        report on Form 10-Q for the quarter ended June 30,
        2001].                                                                                                                                                                                                                                                          
|        | 10.37 |                        |  | Agreement made and entered into as of the 21st day of May 2001
        by and between Lafarge Corporation and Larry J. Waisanen
        [incorporated by reference to Exhibit 10.5 to our report on
        Form 10-Q for the quarter ended June 30, 2001].                                                                                                                                                                                                                                                                                    
|*       | 21    |                        |  | Subsidiaries of the company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*       | 23    |                        |  | Consent of Arthur Andersen LLP, independent public accountants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|*       | 99.1  |                        |  | Letter to Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           




|  |               
|- | --------------
|* | Filed herewith



| |     |                     
| | --- | --------------------
| | (b) | Reports on Form 8-K.

No reports on Form 8-K were filed during the last quarter
of the fiscal year covered by this Annual Report.

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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the company has duly caused
this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                           
| | --------------------------
| | LAFARGE NORTH AMERICA INC.



| |     |                      
| | --- | ---------------------
| | By: | /s/ LARRY J. WAISANEN

| |                             
| | ----------------------------
| |                             
| | Larry J. Waisanen           
| | Executive Vice President and
| | Chief Financial Officer     

Date:  March 28, 2002

Pursuant to the requirements of the Securities Exchange Act
of 1934, this Annual Report has been signed below by the
following persons on behalf of the company and in the capacities
and on the dates indicated:

|                                           |  |                                                       |  |               
|------------------------------------------ |  | ----------------------------------------------------- |  | --------------
|Signature                                  |  | Title                                                 |  | Date          
|                                           |  |                                                       |  |               
|/s/ PHILIPPE R. ROLLIERPhilippe R. Rollier |  | President and Chief Executive Officer and Director    |  | March 28, 2002
|                                          
|/s/ LARRY J. WAISANENLarry J. Waisanen     |  | Executive Vice President and Chief Financial
	Officer |  | March 28, 2002
|                                          
|/s/ YVON BRINDAMOURYvon BrindAmour       |  | Vice President and Controller                         |  | March 28, 2002
|                                          
|/s/ BERTRAND P. COLLOMBBertrand P. Collomb |  | Chairman of the Board                                 |  | March 28, 2002
|                                          
|/s/ MARSHALL A. COHENMarshall A. Cohen     |  | Director                                              |  | March 28, 2002
|                                          
|/s/ PHILIPPE P. DAUMANPhilippe P. Dauman   |  | Director                                              |  | March 28, 2002
|                                          
|/s/ BERNARD L. KASRIELBernard L. Kasriel   |  | Director                                              |  | March 28, 2002
|                                          
|/s/ JACQUES LEFÈVREJacques Lefèvre         |  | Director                                              |  | March 28, 2002
|                                          
|/s/ PAUL W. MACAVOYPaul W. Macavoy         |  | Director                                              |  | March 28, 2002

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|                                               |  |          |  |               
|---------------------------------------------- |  | -------- |  | --------------
|Signature                                      |  | Title    |  | Date          
|                                               |  |          |  |               
|/s/ CLAUDINE B. MALONEClaudine B. Malone       |  | Director |  | March 28, 2002
|                                              
|/s/ ROBERT W. MURDOCHRobert W. Murdoch         |  | Director |  | March 28, 2002
|                                              
|/s/ BERTIN F. NADEAUBertrin F. Nadeau          |  | Director |  | March 28, 2002
|                                              
|/s/ JOHN D. REDFERNJohn D. Redfern             |  | Director |  | March 28, 2002
|                                              
|/s/ JOE M. RODGERSJoe M. Rodgers               |  | Director |  | March 28, 2002
|                                              
|/s/ MICHEL ROSEMichel Rose                     |  | Director |  | March 28, 2002
|                                              
|/s/ LAWRENCE M. TANENBAUMLawrence M. Tanenbaum |  | Director |  | March 28, 2002
|                                              
|                                              
|                                              
|                                              
|                                              
|Gerald H.
	Taylor                              |  | Director |  |               

92