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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                      ------------------------------------

                                   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, 1999       COMMISSION FILE NUMBER 0-11936
                      ------------------------------------

                              LAFARGE CORPORATION

<TABLE>
<S>                                            <C>
          INCORPORATED IN MARYLAND                  I.R.S. EMPLOYER IDENTIFICATION NO.
    11130 SUNRISE VALLEY DRIVE, SUITE 300                       58-1290226
           RESTON, VIRGINIA 20191
               (703) 264-3600
</TABLE>

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

<TABLE>
<CAPTION>
          TITLE OF EACH CLASS                  NAME OF EACH EXCHANGE ON WHICH REGISTERED
          -------------------                  -----------------------------------------
<S>                                            <C>
Common Stock, par value $1.00 per share             New York Stock Exchange, Inc.
                                                      The Toronto Stock Exchange
</TABLE>

          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 [ ]

     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.

     The aggregate market value of the voting stock held by nonaffiliates of the
company at March 6, 2000 was $707,811,263.

     There were 69,009,550 shares of Common Stock and 4,484,097 Exchangeable
Preference Shares of our subsidiary, Lafarge Canada Inc., outstanding as of
March 6, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the company's definitive Proxy Statement for the 2000 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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                              LAFARGE CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                           FOR THE FISCAL YEAR ENDED
                               DECEMBER 31, 1999

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
                                   PART I
Item 1.   Business....................................................    1
          Executive Officers of the Company...........................   23
Item 2.   Properties..................................................   25
Item 3.   Legal Proceedings...........................................   25
Item 4.   Submission of Matters to a Vote of Security Holders.........   26

                                  PART II
Item 5.   Market for the Company's Common Equity and Related
          Stockholder Matters.........................................   27
Item 6.   Selected Consolidated Financial Data........................   28
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   29
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................   45
Item 8.   Financial Statements and Supplementary Data.................   46
Item 9.   Changes In and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................   75

                                  PART III
Item 10.  Directors and Executive Officers of the Company.............   76
Item 11.  Executive Compensation......................................   76
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   76
Item 13.  Certain Relationships and Related Transactions..............   76

                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
          8-K.........................................................   77
          Signatures..................................................   81
</TABLE>

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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") which 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 Canada and the U.S.

- 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

     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 Corporation and its subsidiaries. Our executive offices are located
at 11130 Sunrise Valley Drive, Suite 300, Reston, Virginia 20191, and our
telephone number is (703) 264-3600.

                                     PART I

ITEM 1.  BUSINESS

  Who are we?

     Lafarge Corporation, together with its subsidiaries, is North America's
largest diversified supplier of construction materials. We provide the
construction industry with a full range of aggregate, concrete and concrete
products, asphalt, cement and cementitious materials and gypsum wallboard that
build your world.

     We have approximately 800 operations doing business in most states and
throughout Canada where we conduct our business through our subsidiary, Lafarge
Canada Inc. Our products are used in roads, hospitals, department stores, sports
stadiums, banks, museums, high-rise apartments, amusement parks, swimming pools
and bridges on which the world depends. In 1999, we generated net sales of $2.65
billion and we shipped 14.3 million tons of cement, 78.3 million tons of
aggregate, 10.6 million cubic yards of ready-mixed concrete and 890 million
square feet of gypsum wallboard.

     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 over 10,000 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.

  How are we organized; what do we make?

     Our business is organized into three operating segments: Construction
Materials, Cement and Lafarge Gypsum. Each represents a separately managed
strategic business unit with different capital requirements and marketing
strategies.

     - Construction Materials

        - Produces and supplies aggregate (crushed stone, sand and gravel);

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        - Produces and supplies ready-mixed concrete, concrete products and
          asphalt; and

        - Provides road paving and construction services.

     - Cement

        - Produces and distributes portland and specialty cements;

        - Distributes cementitious materials such as fly ash and silica fume;
          and

        - Processes fuel-quality waste and alternative raw materials for cement
          kilns.

     - Lafarge Gypsum

        - Produces and distributes a full line of gypsum wallboard 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 Item
7, Part II of this Annual Report and the "Segment and Related Information" of
Notes to Consolidated Financial Statements set forth under Item 8, Part II 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 over 50 percent of our common stock. The Lafarge Group, a world leader in
building materials, holds leading positions in each of its five divisions:
cement, aggregate and concrete, roofing, gypsum and specialty materials. The
Lafarge Group employs over 70,000 people in 68 countries and generated sales in
excess of $11.2 billion in 1999.

     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

<TABLE>
<S>   <C>
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.
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.
</TABLE>

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<TABLE>
<S>   <C>
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 reorganized our business into the three cement regions
      and three construction materials regions.
1994  We divested our Texas and Alabama cement 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 wallboard 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 $110 million
      Richmond plant, completed in 1999, increased annual clinker
      production capacity from approximately 600,000 tons to 1.1
      million tons. The $170 million Sugar Creek plant and
      underground limestone mine, expected to be fully operational
      in the first half of 2001, will 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.
      Finally, we announced a definitive agreement to acquire
      Atlantic Group Limited, a Newfoundland gypsum wallboard
      manufacturing plant and Atlantic Gypsum Resources, Inc., a
      Newfoundland gypsum quarry.
1999  We began construction of a state-of-the-art wallboard
      manufacturing plant in Silver Grove, Kentucky. With an
      estimated annual capacity of 900 million square feet of
      wallboard, the new plant, slated to open in the spring of
      2000, will be the biggest single-line production facility in
      the U.S. The plant is expected to satisfy 100 percent of its
      primary raw material requirements by using recycled
      materials, including reclaimed paper and synthetic gypsum.
      We also broke ground on an almost identical wallboard
      manufacturing plant in Palatka, Florida, scheduled to open
      in early 2001.
</TABLE>

  What were our acquisitions and capital improvements in 1999?

     On January 1, 1999, we acquired Atlantic Group Limited, a Newfoundland
gypsum wallboard manufacturing plant, and Atlantic Gypsum Resources, Inc., a
Newfoundland gypsum quarry. We have since begun to upgrade the manufacturing
capacity and convert it to a year round operation. In addition, we purchased a
joint compound manufacturing facility in Quebec.

     In March 1999, we acquired Corn Construction, a New Mexico aggregate,
asphalt and road paving operation. We have since fully integrated it into our
western U.S. construction materials business. We also had 12 smaller
acquisitions in our U.S. and Canadian construction materials businesses.

     In June 1999, our wholly owned subsidiary, Mineral Solutions Inc., acquired
the Muskogee Environmental Conservation Company, further enhancing its
leadership position in the fly ash marketplace.

     Our business is relatively capital-intensive. During the three-year period
ended December 31, 1999, our capital expenditures approximated $664 million,
principally for the modernization or replacement of existing plants and
equipment. Of this amount, Construction Materials, Cement and Lafarge Gypsum
expended approximately 29 percent, 58 percent and 9 percent, respectively.
During the same period, excluding Redland which was financed by the issuance in
July 1998 of $650 million in public debt, we also invested approximately $166
million in various acquisitions that expanded our market and product lines. Of
this amount, Construction Materials, Cement and Lafarge Gypsum expended
approximately 56 percent, 40 percent and 4 percent,

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respectively. During the three-year period ended December 31, 1999, operating
cash flows and divestment proceeds totaled $1,198 million.

     In 1999, operating cash flows and divestment proceeds totaled $444 million,
while investments (capital expenditures and acquisitions), reached $374 million.
During 1999, Lafarge's proceeds from the sale of non strategic assets, surplus
land and other miscellaneous items totaled $46 million.

     In 2000, we expect capital expenditures to total approximately $550 to $600
million, excluding new acquisitions. This level of spending is substantially
above 1999 and previous years due to the large number of previously approved
major projects that are now in process. 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 2000 capital
expenditures will include portions of the $90 million state-of-the-art gypsum
wallboard plant currently under construction in Kentucky and portions of the $85
million gypsum wallboard plant we plan to build in Florida. The plants will be
nearly identical and when fully operational will each have the capacity to
produce 900 million square feet of wallboard a year by using recycled materials
and synthetic gypsum. When the Kentucky plant begins operations as planned in
the second quarter of 2000, it will be the largest single wallboard production
line in the U.S. The Florida plant is expected to begin operations in the first
quarter of 2001. In addition, we expect our 2000 capital expenditures to include
amounts spent on the $170 million cement plant and underground limestone mine in
Sugar Creek, Missouri. This plant is expected to be fully operational in the
first half of 2001.

  What is our business strategy?

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

-   GROWTH AND DEVELOPMENT, both through acquisitions and internal development,
    is one of our highest priorities. In 1999, we strengthened our competitive
    position through acquisitions and capital improvements in each of our three
    segments: Construction Materials, Cement and Lafarge Gypsum. These
    acquisitions and capital improvements are discussed previously in this
    Annual Report under "What were our acquisitions and capital improvements in
    1999?"

          These actions and other internal developments (described in the
     Management's Discussion and Analysis of Financial Condition and Results of
     Operations set forth in Part II, Item 7 of this Annual Report) have changed
     our financial structure appreciably. Our ratio of long-term debt to total
     capitalization, which has been exceptionally low the past few years,
     increased to 30 percent at the end of 1998, but declined in 1999 to 26
     percent, levels well within our internal target range.

          Our basic objective is to maintain a strong balance sheet with
     sufficient flexibility to capitalize on opportunities when they arise. We
     continue to pursue such opportunities, particularly in aggregate and
     related activities. It is worth noting that these less cyclical businesses
     accounted for nearly 30 percent of our revenue stream in both 1999 and
     1998, compared with only 17 percent in 1997.

-   OPERATIONAL EXCELLENCE encompasses the range of programs we have established
    for manufacturing efficiency, cost control and continuous improvement.

          Synergy is an overused term. Nonetheless, it is relevant to our
     concept of operational excellence. We continually look for
     cost-efficiencies which present themselves as we grow in size. For example,
     we expect to adapt Lafarge Gypsum's new forecasting, pricing and customer
     service project for use in our Cement segment. Also, dispersing our large
     sales force across the U.S. and Canada enables us to cross sell our
     products and services. In the Maritimes and Quebec, for instance, we are
     capitalizing on an already strong brand identity by using our existing
     Construction Materials and Cement sales organizations to market gypsum
     wallboard from our Newfoundland plant as well as joint compound from our
     recently acquired plant in Quebec.

          Our vision of operational excellence includes common operating models
     and the rigorous application of best business practices. These types of
     programs remain priorities for all of our product lines and are

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     supported at the corporate level through our Corporate Technical Services
     Department for the Cement segment and our Business Performance Department
     in the Construction Materials segment.

-   COMMITMENT TO CHANGE provides a third pathway to superior performance.

          As an example, in 1999 we opened a new Shared Services Center to
     provide low-cost, high-volume accounting and transaction services for our
     Cement segment. Previously, these services were performed in each of the
     three regional cement offices.

          Based on our success with the Cement Shared Services Center, we are
     moving forward with a Shared Services Center for our Construction Materials
     segment. This change will consolidate transaction processing and
     high-volume accounting functions now performed in four regions.

          Perhaps one of our most important changes is our current
     implementation of Economic Value Added (EVA) as a management tool to help
     us measure and capture value. Following the Lafarge Group's lead, we
     (beginning with the senior management team this year) will use EVA as one
     measurement tool for incentive compensation. Training programs and
     communications targeted at all managers will be intensified in 2000 in
     preparation for expanding this concept in 2001.

          E-business represents another example of how Lafarge is committed to
     change. Although e-business is not yet a major factor in the construction
     materials business, we feel it will be. As a result, we have made an equity
     investment in BuildNet, which is working on providing homebuilders with
     on-line access to the back offices of distributors and material suppliers
     like Lafarge so they can coordinate their inventory and product needs. We
     have also launched a process for on-line procurement, and have teams
     studying several other potential avenues of e-business that could give us a
     competitive advantage.

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

          The competitive advantage associated with being a large company is
     available only if we can capitalize on synergies between our three
     operating segments. This requires communication, collaboration and
     teamwork. For example, purchasing activities that were once highly
     decentralized are now coordinated across all product lines, leveraging the
     buying power of a $2.6 billion company to achieve substantial, permanent
     savings.

          Our goal is to create an atmosphere of common business values, in
     which employees constantly look for opportunities and threats 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 became one of the largest producers of aggregate in the U.S. after our
1998 acquisition of more than 100 aggregate, road paving, concrete and other
operations that were once part of the UK-based Redland PLC group. This
acquisition gave us leading market positions in the western mountain states and
Maryland, plus operations that complemented existing businesses in New York and
southwestern Ontario. It also increased our sales of aggregate by approximately
75 percent.

     Our U.S. construction materials operations are located primarily in
Colorado, New Mexico, Kansas, Louisiana, Missouri, Ohio, Maryland, Pennsylvania,
West Virginia and Wisconsin. In Canada, we are the largest producers of
concrete-related building materials. We are the only producer of ready-mixed
concrete and construction aggregate in Canada 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. During
1999, our Construction Materials segment accounted for 53 percent of
consolidated net sales, after the elimination of intracompany sales, and 34
percent of consolidated income from operations.

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<PAGE>   8

     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 and

- 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 240
construction materials locations at December 31, 1999, including:

     - 90 ready-mixed concrete plants, with 32 percent of the plants
       concentrated in Colorado, with lesser concentrations in Missouri,
       Louisiana, Maryland and Wisconsin, and the balance located in Kansas and
       New Mexico;

     - 90 construction aggregate facilities, of which 47 percent are in
       Colorado, 17 percent in Ohio and the remainder in Pennsylvania, West
       Virginia, Wisconsin, New Mexico, New York, Missouri and Maryland; and

     - 30 asphalt facilities concentrated in Colorado and Maryland with the
       remaining plants in New York, New Mexico and Missouri.

     We owned or had a majority or joint interest in approximately 460
construction materials facilities in Canada at December 31, 1999, including:

     - 180 ready-mixed concrete plants concentrated in the provinces of Ontario
       (where approximately 46 percent of the plants are located), Alberta,
       Quebec and British Columbia and to a lesser extent in New Brunswick, Nova
       Scotia, Saskatchewan and Manitoba;

     - 195 construction aggregate facilities, approximately 46 percent of which
       are located in Ontario, while the others are located throughout Alberta,
       Saskatchewan, British Columbia, Quebec, Manitoba, New Brunswick and Nova
       Scotia; and

     - 30 asphalt facilities also concentrated primarily in Ontario with the
       remainder in Alberta, Nova Scotia, New Brunswick, British Columbia.

     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.

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     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 any 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 1999 were Colorado, Maryland and New Mexico. Other states in which
we had significant sales of construction materials included: Missouri,
Wisconsin, Louisiana, Ohio, New York, Pennsylvania, Wyoming and Kansas. In
Canada, we had our most significant sales of construction materials in Ontario
and Alberta.

     In 1999, 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, 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-mix concrete and concrete products is seasonal
because construction activity may diminish 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.

  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.

     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 largely depends 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 other 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
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<PAGE>   10

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 SEGMENT

  Who are we?

     We are the largest cement-manufacturing company in Canada, the third
largest in the U.S., and we operate North America's broadest cement distribution
system by truck, rail, barge and 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.

     In 1999, cement net sales increased 7 percent to $1.20 billion and
operating profit increased 11 percent to $320.5 million. During 1999, cement
accounted for 41 percent of our consolidated net sales, after the elimination of
intracompany sales, and 58 percent of consolidated income from operations.

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

        - Portland

        - Masonry

     And specialty cements:

        - 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.
At December 31, 1999, Systech had waste processing and storage facilities at
three of Lafarge's U.S. cement plants. Systech processed approximately 56
million gallons of supplemental fuel in 1999. Waste-derived fuels supplied by
Systech constituted approximately 11 percent of all fuel used in our cement
operations during 1999.

     Another wholly owned subsidiary, Mineral Solutions Inc., engages in the
management and marketing of fly ash, a coal combustion product which is the
residue produced by coal burning, electricity generating plants. 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. We believe that Mineral
Solutions is a leading North American supplier of fly ash.

     We include the financial results of Systech and Mineral Solutions in
Cement's financial results.

                                        8
<PAGE>   11

  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 principal 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;

     - mixing and grinding may be done by either a wet or a dry process;

     - 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 which starts 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 which, 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, 1999, we operated 15 full-production cement manufacturing plants
                                        9
<PAGE>   12

with a combined rated annual clinker production capacity of approximately 12.8
million tons consisting of 5.8 million tons in Canada and 7.0 million tons in
the U.S. We also operated two cement grinding facilities.

     The Canadian Portland Cement Association's "Plant Information Summary"
report which was prepared as of December 31, 1998, 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 33
percent of the total active industry clinker production capacity in Canada.

     A similar report for the U.S. prepared as of December 31, 1998, shows that
our operating 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, 1999. 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.

                  RATED ANNUAL CLINKER PRODUCTION CAPACITY OF
                          CEMENT MANUFACTURING PLANTS
                                (IN SHORT TONS)*

<TABLE>
<CAPTION>
             UNITED STATES PLANTS
----------------------------------------------
                                      CLINKER
      LOCATION         PROCESS       CAPACITY
      --------         -------       ---------
<S>                    <C>           <C>
Paulding, OH.........    Wet           470,700
Fredonia, KS.........    Wet           375,900
Whitehall, PA........    Dry***        785,900
Alpena, MI...........    Dry         2,275,700
Davenport, IA........    Dry**         943,600
Sugar Creek, MO......    Dry           517,500
Joppa, IL............    Dry***      1,172,900
Seattle, WA..........    Wet           420,000
                                     ---------
  Total Capacity..............       6,962,200
                                     =========
  Total 1999 clinker
     production...............       6,883,000
                                     =========
  1999 production as a
     percentage of total
     capacity.................              99%
                                     =========
</TABLE>

<TABLE>
<CAPTION>
               CANADIAN PLANTS
----------------------------------------------
                                      CLINKER
      LOCATION         PROCESS       CAPACITY
      --------         -------       ---------
<S>                    <C>           <C>
Brookfield, N.S......    Dry           516,300
St-Constant, QUE.....    Dry         1,046,300
Bath, ONT............    Dry***      1,120,700
Woodstock, ONT.......    Wet           560,200
Exshaw, ALTA.........    Dry**       1,279,900
Kamloops, B.C........    Dry           211,700
Richmond, B.C........    Dry**       1,102,300
                                     ---------
  Total Capacity..............       5,837,400
                                     =========
  Total 1999 clinker
     production...............       4,880,000
                                     =========
  1999 production as a
     percentage of total
     capacity ****............              92%
                                     =========
</TABLE>

---------------
   * One short ton equals 2,000 pounds.

  ** Preheater, pre-calciner plants. The capacity of Exshaw's preheater,
     pre-calciner kiln is 65% of the plant's clinker production capacity.

 *** Preheater plants. The capacity of Joppa's preheater kiln is 55% of the
     plant's clinker production capacity.

**** Calculated based on partial year operations of the new Richmond plant.

     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.

                                       10
<PAGE>   13

     - 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 which 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.

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

     At December 31, 1999, 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. The Fort Whyte
grinding plant was shutdown in 1994; furthermore, the Edmonton, Montreal East
and Superior grinding plants have been shutdown for several years because cement
grinding has not been cost effective at these locations. These plants were used
during 1999 for the storage of cement. The Port Manatee and Tampa plants include
facilities for receiving clinker and cement by water. We also own clinker-
producing plants that have been shutdown in Havelock, New Brunswick and Fort
Whyte, Manitoba.

  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, 1999,
approximately 90 percent and 82 percent of our clinker production capacity in
Canada and the U.S., respectively, used the dry process. The Portland Cement
Association estimates that approximately 94 percent of the Canadian industry's
clinker capacity and approximately 78 percent of the U.S. cement industry's
clinker 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 use of fuel-quality waste supplied by Systech Environmental Corporation
also has resulted in substantial fuel cost savings. At December 31, 1999, we
used fuel-quality waste materials obtained and processed by Systech as fuel at
three of our U.S. cement plants. Fuel-quality waste supplied by Systech
constituted approximately 11 percent of the fuel used by us in all of our cement
operations during 1999.

     Our three U.S. cement plants which utilize fuel-quality waste are subject
to emission limits and other requirements under the Federal Resource
Conservation and Recovery Act ("RCRA") and Boiler and Industrial Furnaces
("BIF") 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 the RCRA and BIF regulations.

                                       11
<PAGE>   14

     The following table shows the possible alternative fuel sources for our
cement manufacturing plants in the U.S. and Canada at December 31, 1999.

<TABLE>
<CAPTION>
               PLANT LOCATION                                      FUELS
               --------------                  ---------------------------------------------
<S>                                            <C>
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, Fuel-Quality Waste, 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
</TABLE>

  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 1999 were
Michigan and Florida. Other states in which we had significant sales included:
Wisconsin, Ohio, Minnesota, Louisiana, Iowa, Illinois, Washington, Missouri,
Indiana, New York, Kansas, Tennessee, Pennsylvania, North Dakota, Nebraska,
Massachusetts, Kentucky and New Jersey.

     In Canada, we made our most significant sales of cement in Ontario and
Alberta, which together accounted for approximately 49 percent of our total
Canadian cement shipments in 1999. Other provinces in which we had significant
sales included British Columbia and Quebec. Approximately 24 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 1999, 1998 or 1997.

  How do we distribute products to our customers?

     At December 31, 1999, our U.S. sales offices were located in Port Manatee,
Florida; Davenport, Iowa; Lansing, Michigan; Independence, Missouri; Buffalo,
New York; Valley City, Bismarck and Grand Forks, North Dakota; Maumee, Ohio;
Whitehall, Pennsylvania; Nashville, Tennessee; Seattle and Spokane, Washington;
and Milwaukee, Wisconsin.

     At December 31, 1999, our Canadian sales offices were located in Edmonton
and Calgary, Alberta; Kamloops and Richmond, British Columbia; Winnipeg,
Manitoba; Moncton, New Brunswick; Richmond Hill and Ottawa, Ontario; Quebec City
and 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

                                       12
<PAGE>   15

located to extend the marketing area of each plant. Because of freight costs,
most cement is sold within a radius of 250 miles from the producing plant,
except for waterborne shipments which can be economically shipped considerably
greater distances. Our cement is distributed primarily in bulk but also in paper
bags.

     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.

  Seasonality: how do changes in the seasons affect our business?

     Our business is affected significantly by seasonal variations in weather
conditions. 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 33
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 19 percent of rated
annual active clinker production capacity. Our cement plants operating in the
U.S. represented an estimated 8 percent of the rated annual active clinker
production capacity of all U.S. cement plants. Our three largest U.S.
competitors accounted for approximately 12 percent, 11 percent and 6 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 Portland Cement Association's "U.S. and Canadian Portland
Cement Industry: Plant Information Summary" report which was prepared as of
December 31, 1998.

  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.

THE GYPSUM SEGMENT

  Who are we?

     With the acquisition of two gypsum wallboard manufacturing plants in
September 1996, Lafarge Gypsum was created. The Buchanan, New York plant,
located 30 miles outside of New York City, and the Wilmington plant in Delaware
produce a wide-ranging line of gypsum wallboard products. On January 1, 1999, we
acquired Atlantic Group Ltd., a supplier of gypsum wallboard in Newfoundland,
Canada. In May 1999, the Company acquired Cel-Tex, a joint compound manufacturer
in Quebec, Canada.

                                       13
<PAGE>   16

     In June 1999, we began construction on a $90 million gypsum wallboard plant
in northern Kentucky, just outside of Cincinnati. Scheduled to begin operations
in the second quarter of 2000, this facility will have the capacity to produce
up to 900 million square feet of  1/2-inch wallboard a year, which would make it
the largest single production line in the U.S. The state-of-the-art plant will
use 100 percent recycled materials, including synthetic gypsum generated from
scrubbers of a nearby power plant. We have also broken ground on an $85 million,
nearly identical wallboard plant in Palatka, Florida. This plant, like the
Silver Grove, Kentucky plant, will use recycled materials and synthetic gypsum
and will also have the capacity to produce up to 900 million square feet of
 1/2-inch wallboard annually when it becomes operational in the first quarter of
2001.

     We offer a full line of gypsum wallboard products for:

        - Partitions

        - Paneling

        - Linings

        - Ceilings

        - Floors

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

  How is gypsum wallboard 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 wallboard:

        - 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;

        - 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 wallboard?

     We own three gypsum wallboard manufacturing plants with a combined annual
production capacity of approximately 890 million square feet (MMSF). The
Buchanan, Wilmington and Corner Brook plants have capacities of 350 MMSF, 435
MMSF and 105 MMSF, respectively. The addition of the Silver Grove plant

                                       14
<PAGE>   17

will double our capacity and in 2001, when the Palatka plant becomes
operational, our capacity will nearly triple from its current level.

     All of the existing 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. All other facilities are located on property owned by the Company.
We believe that each of our manufacturing plants is in satisfactory operating
condition.

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

     Currently, we have ten-year requirements contracts with an unaffiliated
third party for gypsum rock and paper used in the production of gypsum wallboard
at the Buchanan and Wilmington plants. Both contracts terminate in September
2006. The Corner Brook plant obtains its gypsum from a quarry that we own and
paper used in production is obtained from an unaffiliated third party under an
annually renewable contract.

  Who buys our wallboard?

     Our gypsum wallboard 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 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 wallboard
plant's principal markets include Newfoundland, the Maritimes, Quebec and
Ontario. 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.

     During 1999, our gypsum wallboard operations accounted for 6 percent of
consolidated net sales, after the elimination of intracompany sales, and 8
percent of consolidated income from operations.

  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 plant is fully
equipped to ship by rail. The Buchanan plant is in close proximity to its key
markets resulting in over 90 percent of its production being shipped within 100
to 200 miles of the plant. The Wilmington plant ships over 50 percent of its
production within 200 miles of the plant. The Corner Brook plant ships over 25
percent of its production on the island of Newfoundland.

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

     Our gypsum wallboard business is seasonal because construction activity may
diminish 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 wallboard plants and
usually own the gypsum reserves used in manufacturing the

                                       15
<PAGE>   18

wallboard. They also sell gypsum for use in portland cement production,
agriculture and other manufactured gypsum products.

     The gypsum wallboard industry is highly competitive. Producers compete
primarily on a regional basis. Producers whose customers are located close to
their wallboard plants benefit from lower transportation costs. We enjoy this
competitive advantage with respect to wallboard produced at our plants because
of their close proximity to key markets.

     Gypsum wallboard 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 wallboard products are made on the basis of competitive
prices in each market area, generally pursuant to telephone orders from
customers. In the U.S., plant capacity utilization in 1999 was at 100 percent
and there was an industry-wide allocation of product to all customer segments.
At December 31, 1999, we had no backlog.

TRADEMARKS AND PATENTS

     As of December 31, 1999, Lafarge owns, has the right to use or has pending
applications for approximately 30 patents granted by the U.S. and Canada and 103
trademarks related to Cement, Construction Materials and Lafarge 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(TM) 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(R), Futurecrete(R), Agrifarge(R) and WeatherMix(R),
provide customers with enhanced performance for specific applications. Specialty
cements like Lafarge's trademarked SF(TM) cement are designed for durable
applications such as bridges, underwater structures, skyscrapers and industrial
floors. 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 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 products developments and
enhancements for the construction industry with the Construction Materials and
the Cement segments and we have access to their state-of-the-art research and
development resources.

     We and Lafarge S.A. are parties to three agreements 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 Environmental
Corporation, 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 $7.5 million,
$7.4 million and $7.2 million for 1999, 1998 and 1997, respectively. This
includes amounts accrued for technical services rendered by Lafarge S.A. to us,
under the terms of the agreements discussed above, of $6.1 million during 1999,
$6.1 million during 1998 and $6.3 million during 1997.

WHO ARE OUR EMPLOYEES?

     As of December 31, 1999, we employed approximately 10,500 individuals of
which approximately 6,450 were hourly employees. Of these hourly employees,
approximately 5,200 were employed by Construction Materials, 1,000 by Cement and
250 by Lafarge Gypsum. Salaried employees totaled approximately 4,050. These
employees generally act in administrative, managerial, marketing, professional
and technical capacities. Overall, we consider our relations with our employees
to be satisfactory.

                                       16
<PAGE>   19

  Construction Materials

     -- U.S. Construction Materials Operations

     Our approximately 3,400 U.S. construction materials employees consist of
approximately 2,400 hourly employees and 1,000 salaried employees.

     In the U.S., approximately 50 percent of our hourly workforce is covered by
close to 30 collective bargaining agreements with eight major labor unions.
During 1999, five collective bargaining and benefit agreements were successfully
negotiated with union bargaining groups without a work stoppage. In 2000, twelve
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 3,800 at the end of 1999 with approximately 2,800 hourly employees
and 900 salaried employees.

     In eastern Canada, hourly employees are covered by 84 collective bargaining
agreements with a number of unions. There are 41 non-union business units in
which discussions are held directly with employees. During 1999, some 28
collective bargaining agreements became due and were renegotiated without
incident. In Thunder Bay, the collective bargaining agreement with the
International Woodworkers Union resulted in a strike, which is now into its 10th
month. In the Ottawa area, three collective bargaining agreements with the
Teamsters Union have not yet been concluded due to issues associated with the
prevailing market. Discussions are ongoing and the matter may be the subject of
a hearing before the Ontario Labour Relations Board. During the year, there were
two unsuccessful organizing drives and there were also two successful union
certifications, one in a construction unit and the other at an aggregate site.
Some 26 collective bargaining agreements will expire throughout eastern Canada
this year, most notably the ready-mix concrete agreement in the Toronto and
Hamilton marketplace.

     In western Canada, there are 35 collective labor agreements with several
different unions. Six agreements are through employer associations. During 1999
and the first two months of 2000, 16 collective labor agreements were
successfully negotiated. We continue to negotiate 10 collective agreements that
have expired, with no work stoppages anticipated. During 2000, a further nine
collective labor agreements will expire. These agreements are expected to be
renewed without work stoppage.

  Cement

     -- U.S. Cement Operations

     The majority of our U.S. hourly employees are represented by labor unions.
During 1999, labor agreements were negotiated at the Davenport, Iowa cement
plant and at the following distribution terminals: Cleveland and Toledo, Ohio;
Duluth, Minnesota; Superior, Wisconsin and Oswego, New York. During 2000, the
labor agreement will expire at the Paulding, Ohio cement plant. We expect the
agreement to be successfully concluded without work stoppages.

     -- Canadian Cement Operations

     Substantially all of our approximately 500 hourly employees are covered by
labor agreements. In 1999, the labor agreements at the Kamloops, British
Columbia plant and the Edmonton, Alberta and Toronto, Ontario terminals were all
successfully renegotiated without a work stoppage. In 2000, labor agreements at
the Stoney Creek, Ontario slag plant, the Woodstock, Ontario cement plant, the
Richmond, British Columbia cement plant and the Saskatoon, Saskatchewan terminal
will expire. All are expected to be renewed without a work stoppage.

                                       17
<PAGE>   20

  Lafarge Gypsum

     -- U.S. Gypsum Wallboard Operations

     Substantially all of Lafarge Gypsum's approximately 250 U.S. hourly
employees are covered by labor agreements. There are four local labor agreements
with two unions. Two of the collective agreements are at Buchanan, New York
where both are in the first year of two year agreements. At Wilmington,
Delaware, there are also two contracts, one of which is in the first year of a
three year agreement. The other is in the fifth year of a six-year agreement.
These agreements are expected to be renegotiated upon expiration without a work
stoppage. The Buchanan and Wilmington plants have no recent history of labor
disputes.

     -- Canadian Gypsum Wallboard Operations

     All of the approximately 100 hourly employees at our Corner Brook wallboard
and expanded polystyrene plants are covered by a labor agreement. This agreement
is in the first year of a five year contract. There is no recent history of
labor disputes at the Corner Brook plant. There are 15 non-union hourly
employees at the Chambly, Quebec joint compound manufacturing plant where
discussions are held directly with employees.

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 compliance 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, routine training and exchange of information by
environmental professionals, environmental recognition award program, and
routine and emergency reporting systems.

     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 Item 7
of Part II of this Annual Report, which is incorporated herein by reference. For
the years ended December 31, 1999, 1998 and 1997, total capital expenditures and
remediation expenses incurred for environmental matters are not material to the
financial position, results of operations or liquidity of Lafarge. 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 the financial condition, results of operations or
liquidity of Lafarge.

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

  Resource Conservation and Recovery Act -- Boiler and Industrial Furnaces
Regulations

     We currently operate three 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 (Alpena, Michigan; Paulding, Ohio; and Fredonia,

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<PAGE>   21

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 three BIF cement plants have submitted,
in a timely manner, formal Part B permit applications, which is the first step
in the permitting process. The Fredonia plant completed its trial burn in 1995
to establish permit limitations to be incorporated into the second step, the
final Part B permit. A draft of the proposed Part B permit was reviewed during
1998; a public hearing was held on March 26, 1999 and a final Part B permit
became effective on January 18, 2000. The Paulding plant conducted its trial
burn in May 1998. A draft permit was circulated for review and comment in 1999;
a proposed permit was published for public comment on February 2, 2000 and a
public hearing is scheduled for March 21, 2000. On October 22, 1998, we
announced that the Alpena plant will cease using fuel-quality wastes no later
than June 1, 2001. During the interim, the plant will continue to use
waste-derived fuels and comply with the applicable RCRA and BIF requirements.

     Over the last few years, the U.S. Environmental Protection Agency ("EPA")
was in the process of revising its BIF regulations. Proposed revisions of the
BIF regulations were initially published 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 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. In the past two years, the EPA has 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
revised regulation was published on September 30, 1999. Existing BIF facilities
have 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.

  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 industry standards as the technical starting point and Subtitle C of RCRA
as its legal authority. We have 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
consensus approach for implementing CKD management standards primarily using
state solid waste authority as the primary legal authority rather than federal
Subtitle C authority. On August 20, 1999, the EPA published a proposed rule
entitled "Standards for the Management of Cement Kiln Dust." In the proposed
rule, the EPA includes comprehensive CKD management standards. The EPA's
proposed approach is for the states to adopt CKD management standards similar to
the EPA's proposed new standards as part of their non-hazardous solid waste
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<PAGE>   22

management region. CKD managed in conformity with these standards would remain a
non-hazardous waste under RCRA. In instance of "egregious or repeated"
violations of these standards, the EPA has proposed that it would classify the
mismanaged CKD as a RCRA hazardous waste. This scenario would give the EPA
federal Subtitle C enforcement authority over the violation in the event the
state failed to take appropriate action. The EPA also stresses that it may never
need to issue a final rule under this state approach, if states actively come
forth with appropriate programs to manage CKD.

     In order to mitigate the anticipated future costs of CKD regulation at the
federal 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 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." Currently, we are involved in two
Superfund remediations. At one site, where we have been named a PRP (a
potentially responsible party), the remedial activities are complete and
long-term maintenance and monitoring are under way. Partial contribution has
been obtained from financially viable parties, including ourselves. The EPA
delisted this site from the National Priority List in 1999. At the other site,
also on the National Priority List, some of the 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 and that numerous
other large disposers of hazardous substances are associated with this site. We
believe that neither matter is material to the financial condition, results of
operations or liquidity of Lafarge. In addition, during the year ended December
31, 1999, no enforcement matters were initiated or resolved or are outstanding
that have a material effect on our financial statements.

  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 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 has entered into settlement discussions with the EPA
in an effort to resolve as many of the issues as
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<PAGE>   23

possible in order to avoid having to proceed with appellate litigation of these
matters. Our Sugar Creek, Missouri plant that is being modernized and expanded
will have to meet the new MACT standards at the time of startup. We believe that
several of our other U.S. plants will likely be required to upgrade and/or
replace existing air pollution control and/or emissions monitoring equipment as
a result of 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
can be modified or new equipment will be required to meet the final MACT
standards. We presently are in the process of auditing all of our cement plants
subject to the new MACT requirements in order to determine what actions will be
needed to comply with the new MACT requirements and to make a determination of
the site specific costs associated with these actions. We do not anticipate the
costs associated with complying with the new MACT standards to have a material
impact on our financial statements.

     Title V of 1990 Clean Air Act Amendments could result in significant
capital expenditures and operational expenses for us. 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 wallboard and waste-fuel operations. We have
submitted all applicable permit applications. During 1999, we began 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 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 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 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. The EPA was prohibited
by Congress from requiring states to revise their implementation plan until
after the next 5-year review of the particulate matter 2.5 and ozone standards
in 2001. On May 14, 1999, the U.S. Court of Appeals for the District of Columbia
Circuit vacated these standards precluding their implementation. The EPA has
petitioned the U.S. Supreme Court seeking to reverse the appellate court
decision.

     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 applicable ozone transport region. 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. In the past, the EPA has recommended that
states only require 30 percent reduction of NOx from cement plants. The EPA
recommendation allows cement plants to

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<PAGE>   24

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 evolving issue of significance to Lafarge in the U.S. and Canada is
global climate change, or CO(2) stabilization/reduction. In December 1997, the
United Nations held an international convention in Kyoto, Japan to take further
international action to ensure CO(2) 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. The consequences of CO(2) reduction measures for cement
producers are potentially significant because CO(2) 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, CO(2) 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. 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. In the U.S. in 1996, we joined the
EPA's Climate Wise program. This voluntary program promotes energy efficiency in
industrial operations and reduces or stabilizes the CO(2) emissions that result
from the generation of electricity.

     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 CO(2) reductions other than by reducing production,
should the U.S. Senate ratify the Kyoto Protocol, and the Protocol comes into
force and effect. It will not be possible to determine the impact on Lafarge
until international, U.S. and Canadian governmental requirements are defined and
we can determine whether emission offsets or credits are obtainable and whether
alternative cementitious products can be substituted.

     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. We intend to vigorously defend this action and believe that it
will not materially impact the Company.

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<PAGE>   25

EXECUTIVE OFFICERS OF THE COMPANY

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

<TABLE>
<CAPTION>
               NAME                                          POSITION                            AGE
               ----                                          --------                            ---
<S>                                     <C>                                                      <C>
Bertrand P. Collomb...............      Chairman of the Board                                    57
Bernard L. Kasriel................      Vice Chairman of the Board                               53
John M. Piecuch...................      President and Chief Executive Officer                    51
Edward T. Balfe...................      Executive Vice President and                             58
                                        President -- Construction Materials
Peter H. Cooke....................      Executive Vice President -- Cement                       51
Larry J. Waisanen.................      Executive Vice President and Chief Financial             49
                                        Officer
Michael J. Balchunas..............      Senior Vice President and President -- U.S. Cement       52
                                        Operations
Jean-Marc Lechene.................      Senior Vice President and President -- Canadian          41
                                        Cement Operations
Alain Bouruet-Aubertot............      Senior Vice President and President -- Lafarge           43
                                        Gypsum
Patrick Demars....................      Senior Vice President -- Corporate Technical             51
                                        Services
Eric C. Olsen.....................      Senior Vice President -- Strategy and Development        36
James J. Nealis III...............      Senior Vice President -- Human Resources                 52
Joseph B. Sherk...................      Vice President and Controller                            51
David C. Jones....................      Vice President -- Legal Affairs and Secretary            58
David W. Carroll..................      Vice President -- Environment and Government             53
                                        Affairs
Kevin C. Grant....................      Vice President and Treasurer                             44
</TABLE>

     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 the Company
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 Managing Director of Lafarge S.A.
from 1989 to 1994, Senior Executive Vice President of Lafarge S.A. from 1987 to
1989 and Executive Vice President of Lafarge S.A. from 1982 until 1987.

     John M. Piecuch was appointed to his current position effective October
1996. He previously served as Group Executive Vice President of Lafarge S.A.
from July 1994 until October 1996. He served as Senior Executive Vice President
of the Company from 1992 to June 1994 and as Executive Vice President of the
Company from 1989 to 1992.

     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 the Company's Construction Materials Eastern Region and
President and General Manager of Permanent Lafarge, a construction materials
affiliate of the Company, from 1990 to 1993.

     Peter H. Cooke was appointed to his current position effective September
1999. Prior to that, he served as Executive Vice President and
President -- Canadian Cement Operations from March 1996 to September 1999. He
served as Senior Vice President and President of the Company's Eastern Cement
Region from July 1990 to February 1996.

                                       23
<PAGE>   26

     Larry J. Waisanen was appointed to his current position effective February
1998. He previously served as Senior Vice President and Chief Financial Officer
of the Company 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.

     Michael J. Balchunas was appointed to his current position effective
September 1999. He served as Senior Vice President and President -- Western
Cement Region from July 1996 to September 1999. From March 1992 to July 1996 he
was President of Systech Environmental Corporation, a wholly owned subsidiary of
the Company. Prior to that he served as Vice President of Operations of the
Company's Great Lakes Region from July 1990 to March 1992.

     Jean-Marc Lechene was appointed to his current position in September 1999.
He previously served as Executive Vice President of Lafarge China from March
1996 to September 1999. Prior to that he served as Senior Vice President Cement
Strategy of Lafarge S.A. from November 1995 to March 1996.

     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.

     Patrick Demars was appointed to his current position effective February
1991. He previously served as Vice President -- Products and Process of the
Company's Corporate Technical Services operations from July 1990 to January
1991. He was a Regional Vice President at CNCP, a Brazilian subsidiary of
Lafarge S.A., from July 1986 to June 1990.

     Eric C. Olsen was appointed to his current position in August 1999. Prior
to that, from May 1993 to August 1999, he was a partner in Trinity Associates, a
management consulting firm focusing on certain capital intensive industries.

     James J. Nealis III was appointed to his current position effective January
1999. 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.

     Joseph B. Sherk was appointed to his current position effective August
1998. From January 1994 to August 1998 he was Vice President and Controller,
Construction Materials, Eastern Region for Lafarge Canada Inc.

     David C. Jones was appointed to his current position in February 1990. He
served as Corporate Secretary of the Company from November 1987 to February
1990.

     David W. Carroll was appointed to his current position in February 1992. He
served as Director Environmental Affairs of the Company 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 the Company 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 Manager of Strategic Studies from June 1991 to June 1992 for Lafarge Fondu
International, a subsidiary of Lafarge S.A.

     There is no family relationship between any of the executive officers of
the Company 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 the Company 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.

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<PAGE>   27

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 wallboard 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 gypsum wallboard plant.

     - 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 wallboard 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.

     We own limestone quarry sites for our U.S. cement manufacturing plants
which 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 approximately 700 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 which permit orderly mining of reserves.

ITEM 3.  LEGAL PROCEEDINGS

     In 1992, Lafarge Canada Inc., the Bertrand & Frere Construction Company
Limited and others were named as defendants in lawsuits filed in the Ontario
(Canada) Court (General Division) arising from the claims of building owners,
the Ontario New Home Warranty Program and others alleging defective concrete,
fly ash and cement used in footings, foundations and floors. Damages claimed
totaled more than Canadian $65 million. Lafarge Canada's liability, if any, in
these lawsuits is uncertain. Lafarge Canada has denied liability and is
defending the lawsuits vigorously. Lafarge Canada has also introduced claims
against some of its primary and excess insurers for defense costs and indemnity,
if any. The lawsuits were joined and a hearing on the issues was completed in
December 1998. The matter was taken under advisement by the presiding judge and
a decision is expected in 2000. Lafarge Canada believes that it has insurance
coverage that will respond to defense expenses and liability, if any, in the
lawsuits.

     On March 18, 1998, a stockholder derivative lawsuit was filed against our
directors in the Circuit Court for Montgomery County, Maryland. The lawsuit
alleged breach of fiduciary duty, corporate waste and gross

                                       25
<PAGE>   28

negligence in connection with our purchase of North American construction
materials assets from Lafarge S.A., our majority stockholder (the "Redland
Transaction").

     The Redland Transaction, proposed to us in late 1997, was evaluated by a
special committee of independent directors after conducting extensive due
diligence and being advised by independent professionals retained by the
committee to assist with its evaluation, one of which, an investment banking
firm, advised the committee regarding the fairness of the price and terms of the
Redland Transaction. Based on its due diligence and the opinions of its
specially-retained advisers, the special committee recommended the Redland
Transaction for approval by the full Board of Directors of the company. On March
16, 1998, the full Board, consisting of a majority of independent directors,
approved the Redland Transaction, which was publicly announced on March 17,
1998.

     The directors advised us that the lawsuit was without merit and have
vigorously defended against the lawsuit. By order dated January 28, 2000, the
Court granted the directors' motion for summary judgment. We have been advised
that plaintiffs have appealed the Court's ruling and that the directors intend
to vigorously contest that appeal.

     Currently, we are involved in two remediations 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. At one site, where we have been named a potentially
responsible party ("PRP"), remedial activities are complete, long-term
maintenance and monitoring are under way and partial contribution has been
obtained from financially viable parties, including us. The U.S. Environmental
Protection Agency ("EPA") delisted this site from the National Priority List in
1999. At the other site, which remains on the National Priority List, several
PRPs named by the EPA have initiated a third-party action against 47 other
parties including us. We also have been named a PRP at this site. The suit
alleges that in 1969 a predecessor of ours 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
and numerous other large disposers of hazardous substances are associated with
this site. We believe that neither matter is material to our financial
condition, results of operations or liquidity.

     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. We intend to vigorously defend this action and believe that it
will not materially impact us.

     When we determine 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 or liability
associated with the legal action is recorded as a liability in the financial
statements. As of December 31, 1999, 1998 and 1997, the liabilities recorded for
environmental obligations and other legal actions are not material to our
financial statements. Although we believe such accruals are adequate, we may
incur costs in excess of amounts provided at December 31, 1999. However, we
believe that the possibility of material liability in excess of amounts reported
in the December 31, 1999 Consolidated Balance Sheet is remote.

     In the ordinary course of business, we are involved in certain other 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, our
liability, if any, arising from these legal actions and claims cannot be
determined with certainty. We believe that all legal and environmental matters
will be resolved without material adverse impact to our financial condition,
results of operations or liquidity.

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

     None during the fourth quarter ended December 31, 1999.

                                       26
<PAGE>   29

                                    PART II

ITEM 5.  MARKET FOR THE COMPANY'S 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 6, 2000, 69,009,550 shares of our Common Stock were outstanding
and held by 3,306 record holders. In addition, on March 6, 2000, 4,484,097
Exchangeable Preference Shares of Lafarge Canada, Inc., which are exchangeable
at the option of the holder into our Common Stock on a one-for-one basis and
have rights and privileges that parallel those of the shares of our Common
Stock, were outstanding and held by 6,315 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.

                                       27
<PAGE>   30

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

     The table below summarizes selected financial information for the Company.
For further information, refer to our consolidated financial statements and
notes thereto presented under Item 8 of this Annual Report.

<TABLE>
<CAPTION>
                                                  YEARS ENDED DECEMBER 31
                                  -------------------------------------------------------
                                    1999       1998        1997         1996       1995
                                  --------   --------   -----------   --------   --------
                                         (IN MILLIONS EXCEPT AS INDICATED BY AN *)
<S>                               <C>        <C>        <C>           <C>        <C>
OPERATING RESULTS
Net Sales......................   $2,654.4   $2,448.2   $   1,806.4   $1,649.3   $1,472.2
                                  ========   ========   ===========   ========   ========
INCOME BEFORE THE FOLLOWING
  ITEMS:.......................   $  481.6   $  407.0   $     300.9   $  236.4   $  185.4
Interest expense, net..........      (44.8)     (27.2)         (6.6)     (14.1)     (15.2)
Income taxes...................     (161.4)    (144.3)       (112.3)     (81.4)     (40.6)
                                  --------   --------   -----------   --------   --------
NET INCOME.....................      275.4      235.5         182.0      140.9      129.6
Depreciation, depletion and
  amortization.................      168.3      156.8         106.3      100.5       94.3
Other items not affecting
  cash.........................      (45.2)     (16.2)         47.7      (33.4)    (105.6)
                                  --------   --------   -----------   --------   --------
NET CASH PROVIDED BY
  OPERATIONS...................   $  398.5   $  376.1   $     336.0   $  208.0   $  118.3
                                  ========   ========   ===========   ========   ========
     TOTAL ASSETS..............   $3,304.2   $2,904.8   $   2,774.9   $1,813.0   $1,713.9
                                  ========   ========   ===========   ========   ========
FINANCIAL CONDITION AT DECEMBER
  31
Working capital................   $  625.3   $  522.9   $    (127.1)(A) $  394.9 $  448.6
Property, plant and equipment,
  net..........................    1,618.3    1,400.8       1,296.0      867.7      797.0
Other assets...................      550.4      566.1         529.4      213.0      198.3
                                  --------   --------   -----------   --------   --------
     TOTAL NET ASSETS..........   $2,794.0   $2,489.8   $   1,698.3   $1,475.6   $1,443.9
                                  ========   ========   ===========   ========   ========
Long-term debt.................   $  719.8   $  751.2   $     135.2   $  161.9   $  268.6
Other long-term liabilities....      351.3      323.4         307.4      203.2      194.3
Shareholders' equity...........    1,722.9    1,415.2       1,255.7    1,110.5      981.0
                                  --------   --------   -----------   --------   --------
     TOTAL CAPITALIZATION......   $2,794.0   $2,489.8   $   1,698.3   $1,475.6   $1,443.9
                                  ========   ========   ===========   ========   ========
COMMON EQUITY SHARE INFORMATION
Net income -- basic*...........   $   3.79   $   3.27   $      2.56   $   2.02   $   1.89
Net income -- diluted*.........   $   3.77   $   3.24   $      2.54   $   1.95   $   1.82
Dividends*.....................   $   0.60   $   0.51   $      0.42   $   0.40   $  0.375
Book value at December 31*.....   $  23.55   $  19.57   $     17.52   $  15.79   $  14.17
Average shares and equivalents
  outstanding..................       72.6       72.1          71.1       69.8       68.7
Shares outstanding at December
  31...........................       73.2       72.3          71.7       70.4       69.2
                                  ========   ========   ===========   ========   ========
STATISTICAL DATA
Capital expenditures...........   $  315.7   $  224.3   $     124.0   $  124.8   $  121.9
Acquisitions...................   $   58.3   $   99.3(B) $       8.8  $   83.5   $   29.3
Net income as a percentage of
  net sales*...................       10.4%       9.6%         10.1%       8.5%       8.8%
Return on average shareholders'
  equity*......................       17.6%      17.6%         15.4%      13.5%      14.2%
Long-term debt as a percentage
  of total capitalization*.....       25.8%      30.2%          8.0%      11.0%      18.6%
Number of employees at December
  31*..........................     10,500     10,400        10,100      6,800      6,600
Exchange rate at December 31
  (Cdn. to U.S.)*..............      0.692      0.654         0.699      0.730      0.733
Average exchange rate for the
  year (Cdn. to U.S.)*.........      0.673      0.674         0.722      0.733      0.729
                                  ========   ========   ===========   ========   ========
</TABLE>

---------------
(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 Redland acquisition that was accounted for similar to a pooling of
    interests.

                                       28
<PAGE>   31

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. Financial
Statements and Supplementary Data of this Annual Report summarize the operating
performance of Lafarge Corporation (the company) 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.)

     The company's 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 -- the production and distribution of portland and specialty cements
and cementitious materials and the processing of fuel-quality waste and
alternative raw materials for use in cement kilns.

     Lafarge Gypsum -- the production and distribution of gypsum wallboard and
related products.

                                       29
<PAGE>   32

<TABLE>
<CAPTION>
                                                                       YEARS ENDED DECEMBER 31
                                                                 ------------------------------------
                                                                   1999          1998          1997
                                                                 --------      --------      --------
                                                                            (IN MILLIONS)
<S>                                                              <C>           <C>           <C>
NET SALES
Construction materials.....................................      $1,419.2      $1,342.3      $  785.4
Cement.....................................................       1,202.8       1,123.7       1,050.5
Gypsum.....................................................         152.5         102.4          92.1
Eliminations...............................................        (120.1)       (120.2)       (121.6)
                                                                 --------      --------      --------
          TOTAL............................................      $2,654.4      $2,448.2      $1,806.4
                                                                 ========      ========      ========
GROSS PROFIT
Construction materials.....................................      $  263.4      $  250.9      $  119.8
Cement.....................................................         405.2         367.7         329.9
Gypsum.....................................................          56.7          30.6          21.5
                                                                 --------      --------      --------
          TOTAL............................................         725.3         649.2         471.2
                                                                 --------      --------      --------
OPERATIONAL OVERHEAD AND OTHER EXPENSES
Construction materials.....................................         (73.9)        (79.6)        (39.8)
Cement.....................................................         (84.7)        (79.0)        (71.1)
Gypsum.....................................................         (14.8)        (10.6)         (8.3)
                                                                 --------      --------      --------
          TOTAL............................................        (173.4)       (169.2)       (119.2)
                                                                 --------      --------      --------
INCOME FROM OPERATIONS
Construction materials.....................................         189.5         171.3          80.0
Cement.....................................................         320.5         288.7         258.8
Gypsum.....................................................          41.9          20.0          13.2
                                                                 --------      --------      --------
          TOTAL............................................         551.9         480.0         352.0
Corporate and unallocated expenses.........................         (70.3)        (73.0)        (51.1)
                                                                 --------      --------      --------
EARNINGS BEFORE INTEREST AND TAXES.........................      $  481.6      $  407.0      $  300.9
                                                                 ========      ========      ========
ASSETS
Construction materials.....................................      $1,239.1      $1,095.3      $1,136.6
Cement.....................................................       1,098.3         956.4         795.2
Gypsum.....................................................         125.1          70.6          71.8
Corporate, Redland goodwill and unallocated assets.........         841.7         782.5         771.3
                                                                 --------      --------      --------
          TOTAL............................................      $3,304.2      $2,904.8      $2,774.9
                                                                 ========      ========      ========
</TABLE>

                          YEAR ENDED DECEMBER 31, 1999

NET SALES

     The company's net sales increased by 8 percent in 1999 to $2,654.4 million
from $2,448.2 million in 1998. U.S. net sales increased 10 percent to $1,867.9
million. The improvement in U.S. sales was primarily due to the continuation of
favorable economic conditions supporting demand in all three segments. Sales
volumes and prices generally increased in construction materials, cement and
gypsum. Canadian net sales were $786.5 million, an increase of $38.6 million or
5 percent. The increase was due to the improving economic conditions in eastern
Canada, higher cement and ready-mix concrete prices, and increased aggregate
volumes and prices. Other positive factors improving Canadian sales included the
Gypsum segment's purchase of a gypsum wallboard factory and a joint compound
manufacturing facility. These increases were partially offset

                                       30
<PAGE>   33

by a slight decline of 0.2 percent in the average value of the Canadian dollar
relative to the U.S. dollar and lower sales in western Canada.

  Construction Materials

     Net sales from construction materials operations in the U.S. and Canada
were $1,419.2 million, which represents an increase of 6 percent from 1998.
Ready-mixed concrete shipments to customers in the U.S. and Canada were 10.6
million cubic yards in 1999, 3 percent higher than 1998, while aggregate sales
volumes of 78.3 million tons were essentially unchanged from last year. In the
U.S., net sales increased by $66.2 million or 9 percent to $841.8 million.
Ready-mixed concrete sales volumes increased by 4 percent as most major markets
posted gains. Average selling prices in the U.S. regions increased by 3 percent
due to increased sales of higher value-added ready-mixed concrete. Aggregate
sales volumes in the U.S. decreased by 3 percent while average selling prices
increased by 5 percent when compared to 1998. The decrease in aggregate sales
volumes despite overall healthy demand was accounted for by softness in some key
markets, such as New Mexico, Ohio and Maryland. In Canada, net sales increased
by $10.7 million or 2 percent. This increase reflects an increase in the average
selling price of most products. Ready-mixed concrete sales volumes in Canada
increased 1 percent from 1998 levels while average selling prices increased by 3
percent. In eastern Canada, sales volumes were 13 percent higher and average
selling prices were slightly higher than 1998 levels. Several acquisitions in
1999 as well as increased project work and mild weather combined to increase
sales. Western Canada ready-mixed concrete volumes were below prior year by 11
percent; however, average selling prices increased by 7 percent. The volume
decline was primarily due to the weak economy in British Columbia and depressed
commodity prices for most of the year in the prairie provinces. Canadian
aggregate sales volumes were 3 percent ahead of 1998 levels and average selling
prices increased 4 percent. Volumes in eastern Canada increased by 9 percent
with an average selling price increase of 7 percent. The average selling price
increase was mainly due to a shift in the product mix to premium products
coupled with strong prices in recently acquired operations. Aggregate volumes in
western Canada declined 8 percent while average selling prices increased only
slightly, mainly due to the weak economic conditions in British Columbia.

  Cement

     Net sales from cement operations increased by 7 percent to $1,202.8 million
from $1,123.7 million in 1998 due to higher sales volumes and average selling
prices. Cement sales volumes increased by 0.7 million tons to 14.3 million tons,
which represents a 5 percent increase, while the selling price per ton to
customers net of freight costs ("net realization") increased by 2 percent. U.S.
net sales increased by $69.9 million to $920.7 million, an 8 percent
improvement, which reflects high levels of construction spending. Cement
shipments advanced 6 percent as most major markets posted gains. Net realization
in the U.S. increased 2 percent. Canadian cement sales increased 3 percent to
$282.1 million from $272.9 million. Cement shipments in Canada increased by 1
percent while net realization increased by 3 percent. In eastern Canada, cement
sales volumes and net realization increased by 7 percent and 4 percent,
respectively. Cement shipments in the Atlantic provinces were 11 percent higher
than in 1998 primarily due to increased commercial and public works projects.
Quebec and Ontario experienced increased shipments of 8 percent and 5 percent,
respectively, due to increases in residential and commercial construction
related to continuing strengthening of the provincial economies. In western
Canada, cement shipments were 6 percent lower than 1998, reflecting weaker
demand in all major markets. The major factors were the negative impact on
British Columbia of the depressed Asian economy, low world commodity prices and
lower sales of oil well cement due to a decline in drilling activity.

  Gypsum

     Net sales from gypsum operations increased by 49 percent to $152.5 million
from $102.4 million in 1998. Strong market demand in the residential and
commercial construction sectors resulted in average selling price increases of
22 percent. Volumes also increased by 22 percent to 890 million square feet. Due
to productivity improvements, both U.S. gypsum plants achieved record production
levels for the second straight year. Volumes from existing facilities in
Wilmington, Delaware and Buchanan, New York rose by 43 million square

                                       31
<PAGE>   34

feet or 6 percent. Volumes from the recently acquired wallboard plant in
Newfoundland, Canada and volumes of imported wallboard of 87 million and 30
million square feet, respectively, accounted for the remaining increase. The
company announced the construction of two state-of-the-art gypsum wallboard
plants in northern Kentucky and northern Florida during the year. When the
plants begin operating in mid-2000 and early 2001, respectively, Lafarge's
gypsum wallboard capacity will increase to more than 2.5 billion square feet per
year.

GROSS PROFIT AND COST OF GOODS SOLD

     The company's gross profit as a percentage of net sales increased to 27.3
percent from 26.5 percent in 1998, reflecting improvements in most major product
lines.

     Construction materials gross profit was comparable to 1998 at 19 percent.
The U.S. and Canada both experienced higher aggregate and ready-mixed concrete
average selling prices. These were offset by higher material costs in all
regions and increased operating costs in the eastern and western U.S. and in
western Canada.

     Cement gross profit was 34 percent compared with 33 percent in 1998. The
improvement was the result of higher average selling prices partially offset by
a 2 percent increase in cash production cost per ton. In Canada, cash production
cost per ton increased by 3 percent primarily due to increased maintenance and
higher power costs at the Woodstock, Ontario plant, and increased fuel costs at
the Exshaw, Alberta and the old Richmond, British Columbia plants. In addition,
costs were negatively impacted by costs associated with the startup of the new
kiln at the Richmond plant. These were partially offset by a slight improvement
in cash production cost per ton in the U.S. The company's cement cost per ton is
heavily influenced by plant capacity utilization. The following table summarizes
the company's cement and clinker production (in millions of tons) and the
clinker production capacity utilization rate:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED
                                                                 DECEMBER 31
                                                                --------------
                                                                1999     1998
                                                                -----    -----
<S>                                                             <C>      <C>
Cement production...........................................    13.55    12.77
Clinker production..........................................    11.76    11.18
Clinker capacity utilization................................       97%      95%
                                                                =====    =====
</TABLE>

     Cement and clinker production were 6 and 5 percent higher than 1998,
respectively. U.S. cement production totaled 8.5 million tons, up 9 percent.
Clinker capacity utilization at U.S. plants increased to 99 percent from 98
percent as several U.S. plants established clinker production records.
Production capacity increased in 1999 compared with 1998 with the acquisition of
the Seattle, Washington plant in the fourth quarter of 1998. The Alpena,
Michigan plant experienced a significant production increase due to increased
efficiencies. Canadian cement production was 5 million tons, up 2 percent.
Canadian clinker capacity utilization increased to 92 percent from 90 percent.
These improvements were due to higher cement and clinker production at five of
the seven Canadian cement plants. The largest increases are attributed to the
Brookfield, Nova Scotia and the Woodstock, Ontario plants producing with two
kilns.

     Lafarge Gypsum's gross profit as a percentage of sales increased by 7
percentage points to 37 percent. This was primarily due to four price increases
during the year resulting from favorable market conditions. For the second
straight year, both U.S. plants set production records in 1999. These favorable
factors were offset somewhat by the impact of the higher costs associated with
the imported wallboard and lower margins associated with the new Canadian
operations.

SELLING AND ADMINISTRATIVE EXPENSES

     Selling and administrative expenses were $235.0 million in 1999 compared
with $216.8 million in 1998. The increase was due to the purchase and
integration of several acquisitions throughout the year, financial system
upgrades in all segments and an increase in consulting fees paid due to the Year
2000 compliance

                                       32
<PAGE>   35

program. Additionally, gypsum operations saw increases due to the implementation
of changes to their marketing, administrative and customer service areas that
were necessary to support the planned growth of the gypsum division. Despite
this, selling and administrative expenses as a percentage of net sales remained
unchanged from 1998 at 8.9 percent.

GOODWILL AMORTIZATION

     Amortization of goodwill was $17.2 million in 1999 compared with $17.6
million in 1998. 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. The company expects to amortize the remaining goodwill over
periods ranging from 15 to 40 years, based on the expected economic lives of the
assets purchased.

OTHER (INCOME) EXPENSE, NET

     Other (income) expense, net, consists of items such as equity income and
gains and losses from divestitures. Other (income) expense, net, was a gain of
$8.5 million in 1999 compared with an expense of $7.8 million in 1998. Other
(income) expense, net, increased primarily as a result of favorable nonrecurring
gains, including the settlement of an outstanding insurance claim and the gain
on the sale of asphalt and paving operations in Maryland and the absence of
certain nonrecurring expenses incurred in 1998.

PERFORMANCE BY LINE OF BUSINESS

  Construction Materials

     The company's operating profit from construction materials operations
(before corporate and unallocated expenses) was $189.5 million, $18.2 million
higher than 1998. The improvement was due to higher ready-mixed concrete sales
volumes in both the U.S. and Canada and higher average selling prices for
ready-mixed concrete and aggregate in the U.S. and Canada, partially offset by
higher material and delivery costs in most regions. U.S. operations earned
$114.8 million, $12.8 million better than 1998 due to increased ready-mixed
concrete sales volumes of 4 percent and higher average selling prices for both
ready-mixed concrete and aggregate of 3 percent and 5 percent, respectively,
partially offset by reduced aggregate volumes of 3 percent and increased
material and delivery costs. The Canadian operations earned $74.7 million, $5.3
million better than 1998, primarily reflecting higher ready-mixed concrete and
aggregate sales volumes of 1 percent and 3 percent, respectively, and higher
average selling prices of 3 percent and 4 percent, respectively. In eastern
Canada, higher shipments and increased average selling prices in all markets
contributed to higher earnings. Earnings in western Canada were below prior year
due to lower ready-mixed concrete and aggregate sales volumes and increased
material costs partially offset by increased average selling prices.

  Cement

     The company's operating profit from its cement operations (before corporate
and unallocated expenses) was $320.5 million, a $31.8 million or 11 percent
improvement from 1998. In the U.S., operating profit was $222.5 million, $36.3
million or 19.5 percent higher than 1998. The improvement was due to 7 percent
higher shipments and a 2 percent increase in net realization partly offset by
higher plant costs and increased clinker and cement purchases (to supplement
production). Of the 7 percent increase in cement shipments, 1.7 percent was due
to the acquisition of the Seattle, Washington cement plant on October 16, 1998.
The company's Canadian cement operations reported an operating profit of $98.0
million, $4.5 million worse than in 1998 primarily due to reduced volumes in
western Canada. This was partially offset by increased volumes in eastern
Canada. Canadian cement cash cost per ton was 3 percent higher than 1998 levels
mainly due to increased maintenance and higher power costs at the Woodstock,
Ontario plant; increased contract work due to the startup of the new kiln at the
Richmond, British Columbia plant and higher fuel costs at the Exshaw, Alberta
plant.

                                       33
<PAGE>   36

  Gypsum

     The company's gypsum wallboard operations reported an operating profit of
$41.9 million, which was more than double last year's operating profit of $20.0
million. Operating margins increased from 19.5 percent in 1998 to 27.5 percent
in 1999 primarily due to a strong market throughout the year, that supported
four price increases. The existing plants also improved operating efficiencies.

EARNINGS BEFORE INTEREST AND TAXES (EBIT)

     In 1999, EBIT was $481.6 million, a $74.6 million or 18 percent improvement
from 1998, reflecting better results in most of the company's operations.
Growing cement volumes in the U.S. and eastern Canada, outstanding results of
Lafarge Gypsum and higher profits in the company's Construction Materials
business in Colorado and eastern Canada contributed to the improvement. The
operating profit in the U.S. was $334.5 million, $75.0 million better than 1998.
Operating profit from Canadian operations was $147.1 million, $0.4 million lower
than 1998 as a depressed western Canadian economy offset the gains realized in
eastern Canada.

INTEREST EXPENSE

     Interest expense increased by $15.1 million in 1999 to $62.7 million
primarily due to a full year's interest on $650 million of external debt issued
in July 1998 (see the Notes to Consolidated Financial Statements) to finance the
Redland acquisition. Interest capitalized was $4.7 million and $3.6 million in
1999 and 1998, respectively.

INTEREST INCOME

     Interest income decreased $2.5 million in 1999 primarily due to lower
average Canadian short-term investment balances.

INCOME TAXES

     Income tax expense increased from $144.3 million in 1998 to $161.4 million
in 1999 due to higher profits in both the U.S. and Canada. The company's
effective income tax rate was 37 percent in 1999 and 38 percent in 1998.

NET INCOME

     The company reported net income of $275.4 million in 1999 compared with
$235.5 million in 1998. The 17 percent improvement resulted from higher volumes
in most of the company's product lines. Higher cement, ready-mixed concrete,
aggregate and gypsum wallboard average selling prices also contributed to the
improvement. These increases were partially offset by higher interest expense
and higher selling and administrative expenses.

GENERAL OUTLOOK

     The company's general outlook for 2000 is favorable in all operating
segments. In the U.S., TEA-21, the federal program authorizing $217 billion of
highway and mass transit money over a six-year period is expected to have an
increasing impact on the business. Several issues that held back activity in
1999, the program's first full year, apparently are being resolved at the state
level and infrastructure-related construction should steadily ramp up from this
point forward. Although rising mortgage rates could slow residential building
activity in 2000, increased public works construction should offset a modest
slowdown in housing. In Canada, a stronger economy is expected as a result of
the turnaround in primary commodity prices in response to improved global
economic activity. Additionally, federal and provincial transport ministers have
agreed to develop a national strategy for revitalizing Canadian highways. It is
estimated that as much as $5 billion (Canadian) could be expended over the next
five years to that end.

                                       34
<PAGE>   37

     In the company's construction materials operations, the outlook for 2000 is
positive. In the U.S. markets, the company expects the demand for construction
aggregate, ready-mixed concrete and the company's other products and services to
remain high. In Canada, with economic conditions expected to improve,
construction spending is anticipated to rise. Overall margins in the
construction materials business are expected to improve due to better pricing,
greater operational efficiencies and moderately higher volumes.

     Management believes that cement consumption in 2000 will increase modestly
in the U. S. largely due to a buoyant economy and the increasing impact of the
TEA-21 program. In Canada, with eastern Canada continuing to strengthen and
improved conditions in western Canada, both shipments and average selling prices
are expected to increase modestly in 2000.

     The company's gypsum operations outlook remains positive, although rising
interest rates could slow residential construction spending from its current
high levels. In addition, the start up of new U.S. domestic wallboard capacity
during the first half of 2000 could increase competitive pressures.

                          YEAR ENDED DECEMBER 31, 1998

NET SALES

     The company's net sales increased by 36 percent in 1998 to $2,448.2 million
from $1,806.4 million in 1997. U.S. net sales increased 64 percent to $1,700.3
million. The improvement in U.S. sales was primarily due to the company's
acquisition of certain North American construction materials operations of
Redland PLC ("Redland"). Other positive factors impacting sales were higher
sales volumes and prices in both cement and gypsum. Canadian net sales were
$747.9 million, a decrease of $21.6 million or 3 percent. The decrease was due
to a decline of 7 percent in the average value of the Canadian dollar relative
to the U.S. dollar that offset an underlying 4 percent improvement in Canadian
dollar net sales.

  Construction Materials

     Net sales from construction materials operations increased by 71 percent to
$1,342.3 million from $785.4 million in 1997. The major cause of this increase
was the company's acquisition of Redland from Lafarge S.A. for $690 million on
June 3, 1998. Lafarge S.A., the majority shareholder of the company, acquired
Redland PLC in December 1997. Since the company acquired Redland from its
majority shareholder, the acquisition was accounted for similar to a pooling of
interests for financial reporting purposes. Accordingly, Redland assets and
liabilities were transferred to the company at Lafarge S.A.'s historical cost,
which approximates the purchase price paid by the company. The accompanying
consolidated balance sheets as of December 31, 1998 and December 31, 1997
include the balance sheets of Redland. The 1998 consolidated statements of
income and cash flows include the full year results of Redland. Redland is
engaged in the production and sale of aggregate, ready-mixed concrete, other
concrete products and asphalt and performs paving and related contracting
services primarily in Colorado, New Mexico, Maryland, New York and Ontario,
Canada. The significant changes in the consolidated statements of income and
cash flows between 1998 and 1997 are primarily due to this acquisition.

     Excluding Redland, net sales of construction materials operations in the
U.S. and Canada were $770.2 million, which represents a 2 percent decrease from
1997, due to the decline in value of the Canadian dollar. Ready-mixed concrete
shipments to customers in the U.S. and Canada were 7.5 million cubic yards in
1998, 1 percent higher than 1997, while aggregate sales volumes increased 3
percent to 44.5 million tons. In Canada, net sales in local currency increased
by $13.1 million or 2 percent. The Redland operations had net sales of $572.1
million. The U.S. Redland operations contributed $547.6 million or 96 percent of
total Redland net sales, while the Canadian operations contributed 4 percent or
$24.5 million. In 1998, the Redland acquisition contributed 2.7 million cubic
yards of ready-mixed concrete and 34.0 million tons of aggregate.

     The 2 percent increase in Canadian sales expressed in Canadian dollars,
excluding Redland operations, reflects an increase in the price of most
products. Ready-mixed concrete sales volumes were unchanged from 1997 levels,
while prices increased by 3 percent. In eastern Canada, sales volumes were 7
percent higher and

                                       35
<PAGE>   38

prices were equal to 1997 levels. A mild fall and winter extended the
construction season which increased sales. Western Canada ready-mixed concrete
volumes were off 6 percent; however, prices increased by 6 percent. The volume
decline was primarily due to the weak economy in British Columbia. Aggregate
sales volumes were 1 percent ahead of 1997 levels, while prices increased 6
percent. Volumes in eastern Canada increased by 11 percent with a price
reduction of 1 percent. The price reduction was mainly due to a shift in the
product mix to lower-priced products. Aggregate volumes in the West declined by
11 percent largely due to weak economic conditions in British Columbia. The
volume decline was offset by an increase in the price of aggregate and a more
favorable product mix of higher quality concrete and premium aggregate sales in
Alberta.

     In the U.S., net sales, excluding Redland operations, increased by $14.0
million or 7 percent to $227.9 million. Ready-mixed concrete sales volumes
increased by 1 percent as all major markets posted gains. Prices in the U.S.
region increased by 2 percent due to increased sales of higher value ready-mixed
concrete. Aggregate sales volumes in the U.S. increased by 8 percent while
prices increased by 4 percent. Due to acquisitions, the Missouri division saw a
volume increase of 45 percent. The strong Cleveland and Youngstown, Ohio markets
helped increase volumes in the Northern division by 3 percent. The Milwaukee
division saw a decrease of 11 percent due to slowing economic conditions.

  Cement

     Net sales from cement operations increased by 7 percent to $1,123.7 million
from $1,050.5 million in 1997 due to higher sales volumes and prices. Cement
sales volumes increased by 0.6 million tons to 13.5 million tons, which
represents a 5 percent increase, while the selling price per ton to customers
net of freight costs ("net realization") and excluding exchange rate
fluctuation, increased by 4 percent. U.S. net sales increased by $93.9 million
to $850.8 million, a 12 percent improvement reflective of high levels of road
paving and other infrastructure spending as well as strength in both the
residential and nonresidential construction sectors. Cement shipments advanced 7
percent as most major markets posted gains. Net realization in the U.S.
increased 4 percent. In Canada, net sales remained stable in local currency but
declined 7 percent when converted to U.S. dollars. Cement shipments decreased by
1 percent while net realization (excluding exchange rate fluctuation) increased
by 3 percent. In eastern Canada, cement sales volumes and net realization
increased by 6 percent and 3 percent, respectively. Higher shipments in Ontario
of 3 percent were due to an increase in residential and commercial construction
combined with a mild autumn, an extended construction season and a strengthening
economy. Cement shipments in Quebec and the Atlantic Provinces were both 8
percent higher than last year. In western Canada, cement shipments were 8
percent lower than 1997, reflecting weaker demand in all major markets. The two
major factors were the negative impact on British Columbia of the depressed
Asian economy and lower sales of oil well cement in the western provinces due to
the negative impact of lower world oil prices on drilling activity.

  Gypsum

     Net sales from gypsum operations increased by 11 percent to $102.4 million
from $92.1 million in 1997. Strong market demand in the residential and
commercial construction sectors resulted in price increases of 8 percent.
Volumes increased 4 percent to 732 million square feet. Both gypsum plants
achieved record production levels due to productivity improvements.

GROSS PROFIT AND COST OF GOODS SOLD

     The company's average gross profit as a percentage of net sales increased
modestly to 26.5 percent reflecting significant improvements in all major
product lines and a change in the company's product portfolio resulting from the
Redland acquisition.

     Construction materials gross profit increased by 4 percentage points to 19
percent. Higher ready-mixed concrete prices in the U.S. and western Canada were
partially offset by lower aggregate prices and higher material costs. Operating
costs were lower in eastern Canada and the U.S. Excluding Redland, ready-mixed

                                       36
<PAGE>   39

concrete operating gross profit per cubic yard rose 8 percent while aggregate
gross profit per ton improved 27 percent.

     Cement gross profit was 33 percent compared with 31 percent in 1997. The
improvement was the result of higher prices as well as a 1 percent reduction in
cash production cost per ton. The company's cement cost per ton is heavily
influenced by plant capacity utilization. The following table summarizes the
company's cement and clinker production (in millions of tons) and the clinker
production capacity utilization rate:

<TABLE>
<CAPTION>
                                                               YEARS ENDED
                                                               DECEMBER 31
                                                              --------------
                                                              1998     1997
                                                              -----    -----
<S>                                                           <C>      <C>
Cement production...........................................  12.77    12.15
Clinker production..........................................  11.18    10.40
Clinker capacity utilization................................     95%      89%
                                                              =====    =====
</TABLE>

     Cement and clinker production were 5 and 8 percent higher than 1997,
respectively. U.S. cement production totaled 7.9 million tons, up 7 percent.
Clinker capacity utilization at U.S. plants increased to 98 percent from 94
percent as six of the eight U.S. plants established clinker production records.
The largest production increase was at the Whitehall, Pennsylvania plant where a
second kiln was restarted. Canadian cement production was 4.9 million tons, up 4
percent. Canadian clinker capacity utilization increased to 90 percent from 82
percent. These improvements were due to higher clinker production at six of the
seven Canadian cement plants, while cement production was better at four of the
seven.

     Lafarge Gypsum's gross profit as a percentage of net sales increased by 7
percentage points to 30 percent. This was primarily due to a price increase of
$9 per thousand square feet. Both plants set production records in 1998.

SELLING AND ADMINISTRATIVE EXPENSES

     Selling and administrative expenses were $216.8 million in 1998 compared
with $161.0 million in 1997. The increase was mainly due to the consolidation of
the Redland operations as well as one-time costs associated with its acquisition
and integration and certain other organizational changes related to the
management structure. Selling and administrative expenses as a percentage of net
sales were 8.9 percent in 1997 and 1998.

GOODWILL AMORTIZATION

     Amortization of goodwill was $17.6 million in 1998 compared with $3.7
million in 1997. The increase was primarily due to amortization of $327.8
million of goodwill associated with the Redland acquisition. 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. The company
expects to amortize the remaining goodwill over periods ranging from 15 to 40
years, based on the expected economic lives of the assets purchased.

OTHER (INCOME) EXPENSE, NET

     Other (income) expense, net, which consists of items such as equity income
and gains and losses from divestitures, was $7.8 million in 1998 compared with
$5.5 million in 1997. The $2.3 million increase in 1998 was due to lower gains
on divestments and asset sales of $3.1 million.

PERFORMANCE BY LINE OF BUSINESS

  Construction Materials

     The company's operating profit from construction materials operations
(excluding Redland and before corporate and unallocated expenses) was $93.4
million, $13.4 million higher than 1997. The improvement was due to higher
ready-mixed concrete and aggregate sales volumes in both the U.S. and Canada.
Higher prices

                                       37
<PAGE>   40

for ready-mixed concrete and aggregate in the U.S. and western Canada, partially
offset by higher material costs, also contributed to the improvement. The
Canadian operations earned $64.7 million, $11.6 million better than 1997,
primarily reflecting higher ready-mixed concrete and aggregate prices. In
eastern Canada, higher shipments in all markets were offset by lower prices.
Earnings in the West increased due to higher prices in most markets somewhat
offset by lower demand and higher material and operating costs. U.S. operations
earned $28.7 million, $1.8 million better than 1997 due to a 9 percent increase
in aggregate sales volumes, a 2 percent improvement in ready-mixed concrete
prices and a 1 percent increase in concrete volumes.

  Cement

     The company's operating profit from its cement operations (before corporate
and unallocated expenses) was $288.7 million, a $29.9 million or 12 percent
improvement from 1997. The company's Canadian cement operations reported an
operating profit in local currency of $152.1 million, $12.4 million better than
in 1997 due to a 3 percent rise in domestic net realization and higher prices
for exports to U.S. operations, which were partially offset by a 1 percent
decrease in domestic cement shipments. These positive factors were largely
offset by a 7 percent reduction in the value of the Canadian dollar, which
resulted in a net increase in profits of $1.6 million denominated in U.S.
dollars. Canadian cement cash cost per ton was 5 percent lower than 1997 levels
mainly due to improvements in operating efficiencies at the St-Constant and
Woodstock plants in eastern Canada. In the U.S., operating profit was $186.2
million, $28.3 million or 18 percent higher than 1997. The improvement was due
to 7 percent higher shipments and a 4 percent increase in net realization partly
offset by higher plant costs, clinker purchases (to supplement production) and
higher prices for cement imports from Canadian operations.

  Gypsum

     The company's gypsum wallboard operations reported an operating profit of
$20.0 million due to the strength of the U.S. commercial and residential
construction sectors, price increases and record production at both plants.

EARNINGS BEFORE INTEREST AND TAXES (EBIT)

     In 1998, EBIT was $407.0 million, a $106.1 million or 35 percent
improvement from 1997. The acquisition of Redland, net of nonrecurring
acquisition and integration costs but before amortization of goodwill,
contributed more than $75 million. Included in EBIT is $12.1 million of
amortization of Redland goodwill. Better results in all operations, partially
offset by the $13.0 million impact of the lower Canadian dollar exchange rate,
added $28.2 million. Operating profit from Canadian operations was $147.5
million, $11.2 million better than 1997. The operating profit in the U.S. was
$259.5 million, $94.9 million better than 1997.

INTEREST EXPENSE

     Interest expense increased by $27.7 million in 1998 to $47.7 million due to
the issuance of $650.0 million of external debt (see the Notes to Consolidated
Financial Statements) to finance the Redland acquisition. Interest capitalized
was $3.6 million and $1.4 million in 1998 and 1997, respectively.

INTEREST INCOME

     Interest income increased $7.1 million in 1998 due to higher levels of
short-term investments throughout the year.

INCOME TAXES

     Income tax expense increased from $112.3 million in 1997 to $144.3 million
in 1998 due to higher profits in both the U.S. and Canada. The company's
effective income tax rate was 38 percent in 1998 and 38.2 percent in 1997.
                                       38
<PAGE>   41

NET INCOME

     The company reported net income of $235.5 million in 1998 compared with
$182.0 million in 1997. The 29.4 percent improvement resulted from the
acquisition of Redland and higher volumes in all of the company's product lines.
Higher cement, ready-mixed concrete, aggregate and gypsum wallboard prices also
contributed to the improvement. These increases were partially offset by higher
interest expense, higher cement plant fixed costs, goodwill amortization related
to Redland and other acquisitions and higher selling and administrative
expenses.

OTHER FACTORS AFFECTING THE COMPANY

  Year 2000

     The company's business application software and supporting computer
infrastructure ("IT Systems") and embedded technology systems such as process
control equipment, instrumentation and other field systems ("Non-IT Systems")
were not affected by problems at the turn of the millennium. The Year 2000
computer problem originated from programmers writing software code that used two
digits instead of four to represent the year. Computer systems using the
"two-digit" format may have experienced problems handling date-sensitive
calculations beyond the year 1999. This could have caused many computer systems
to fail or to produce inaccurate results and could have resulted in failure of,
or slowdown in, certain business activities or operations, which in turn could
have materially and adversely affected the company's results of operations,
liquidity or financial condition. Moreover, the company needed to consider not
only its own products and computer systems, but the Year 2000 readiness of third
parties, including principal customers, key vendors and suppliers, utilities,
banks and similar service providers, which could have materially and adversely
affected the company. During 1997, the company organized and implemented its
Year 2000 compliance program (the "Year 2000 Program"), which included a program
management office staffed with full-time professionals dedicated to the
resolution of Year 2000 issues. The objective of the Year 2000 Program was to
avoid loss of revenues, unplanned downtime or other adverse impacts on the
company's business. Each of the company's major locations had a designated point
of contact who was responsible for the development and implementation of that
location's Year 2000 strategy. The Year 2000 Program addressed the essential
phases, activities and tasks that the company had to undertake for the
successful execution of its Year 2000 Program. The company identified four
phases to describe its process of achieving Year 2000 readiness: (1) inventory
and assessment, (2) optimum scenario definition, (3) transition plan definition
and (4) implementation.

     Prior to year-end, the company completed the first three phases and
substantially all of phase four, the implementation phase, and determined that
the company was Year 2000 compliant. The uncompleted portion of phase four
related to Non-IT Systems in a few plants in the construction materials
operations that have been shutdown for the winter. These plants require minor
upgrading of their Non-IT Systems prior to their planned seasonal openings. The
company believes that there will be no significant disruptions or shutdowns
related to these plants because of the Year 2000 issue.

     The company expected to spend approximately $18.6 million to $21.3 million
in nonrecurring Year 2000 Program costs. As of December 31, 1999, the company
has incurred approximately $15.8 million ($8.7 million capital and $7.1 million
expense) for upgrading or replacing its IT and Non-IT Systems. The company
estimates that less than $2 million will be spent to complete the Year 2000
Program.

     The company believes there are no significant contingencies related to the
Year 2000 issue. However, it is possible that the full impact of the date change
has not been fully recognized. For example, it is possible that Year 2000 or
similar issues (i.e., Year 2000 leap year-related problems) may occur with
billing, payroll or monthly, quarterly or year-end financial closings. The
company believes that such problems, if any, are likely to be minor and
correctable. Further, the company may still be negatively affected if its
customers or suppliers are adversely affected by Year 2000 or similar issues.
The company currently is not aware of any significant Year 2000 or similar
problems that have arisen for its customers or suppliers. The company believes
there are no significant remaining contingencies related to the Year 2000 issue.

                                       39
<PAGE>   42

  Environmental Matters

     The company's operations, like those of its 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 the company's 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
U.S. Environmental Protection Agency ("EPA") may commence a civil action against
potentially responsible parties ("PRPs") or order PRPs to remediate sites
containing hazardous substances and pollution associated with past or ongoing
practices. Under Superfund, strict liability for cleanup costs can be imposed
even if a PRP was not directly responsible for site conditions. In addition, the
liability is joint and several, which means that the EPA can seek the entire
cost of cleaning up a site from one PRP, even if other PRPs were responsible for
a substantial portion of the contamination. Some of the environmental laws
intended to control or prevent pollution include the pollution control
provisions of RCRA (controlling solid and hazardous wastes), the Clean Water Act
(controlling discharge of pollutants into the waters of the U.S.) and the Clean
Air Act (controlling emission of pollutants into the atmosphere).

     To prevent, control and remediate environmental problems and maintain
compliance with permitting requirements, the company maintains an environmental
program designed to monitor and control environmental matters. This program
includes recruitment, training and retention of personnel experienced in
environmental matters. Employees of the company are responsible for identifying
potential environmental issues and bringing these issues to the attention of
management who are responsible for addressing environmental matters. In this
regard, the company requires local/regional management to immediately report to
corporate management any spills or material instances of non-compliance. In
addition, the company requires the reporting of routine environmental matters on
a quarterly basis. If necessary, the company engages outside consultants to
determine an appropriate course of action and estimate the likely financial
exposure presented by the environmental matter. The company routinely reviews
all of its properties to determine whether remediation is required, the adequacy
of accruals for such remediation, the status of all remedial activities and
whether improvements to the site are required to meet current and future permit
or other requirements under the environmental laws.

     The company is involved in two Superfund remediations. At one site
(delisted from the National Priority List in 1999), remedial activities are
complete and long-term maintenance and monitoring are under way. Partial
contribution has been obtained from financially viable parties, including the
company. At the other site, several PRPs have initiated an action against 47
other parties, including the company. The suit alleges that a predecessor of the
company sold equipment containing hazardous substances that may now be present
at the site. It appears the U.S. Department of Defense is the largest disposer
and that many others may have disposed large amounts of hazardous substances at
this site. Management believes that neither matter is material to the company.
In December 1999, an action was filed against the company 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. The company intends to vigorously defended this action and
believes it will not materially impact the company. The company may also be
involved in certain environmental enforcement matters. During 1999, no other
material enforcement matters were initiated, resolved or outstanding.

     The company records 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 the company.
While the company believes the possibility of
                                       40
<PAGE>   43

incurring material environmental liability in excess of recorded amounts is
remote, the company may incur environmental costs in excess of amounts recorded
at December 31, 1999.

     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,
1999, 1998 and 1997, environmental capital expenditures and remediation expenses
are not material to the company. However, the company's 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;
promulgation of final Clean Air Act maximum achievable control technology
regulations governing air toxic emissions from non-waste burning cement plants;
state revisions of (Clean Air Act) state implementation plans to require NOx
reductions for cement plants operating in certain areas east of the Mississippi;
new permit requirements under Title V of the Clean Air Act; and the potential
U.S. Senate ratification and enactment of legislation to implement the Kyoto
Protocol which may require the company to reduce CO2 emissions. The company
cannot presently determine whether these proposed changes will require capital
expenditures or other remedial actions, or the effect of such changes on the
company's financial statements. 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, the company
cannot determine at this time whether capital expenditures and other remedial
actions that the company may be required to undertake in the future will
materially affect its financial position, results of operations or liquidity.
With respect to known environmental contingencies, the company has recorded
provisions for estimated probable liabilities and does not believe that the
ultimate resolution of such matters will have a material adverse effect on the
financial condition, results of operations or liquidity of the company.

                     MANAGEMENT'S DISCUSSION OF CASH FLOWS

     The Consolidated Statements of Cash Flows summarize the company's 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.

     The company's liquidity requirements arise primarily from the funding of
its capital expenditures, working capital needs, debt service obligations and
dividends. The company generally meets its 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 the company's net income adjusted for noncash items. Depreciation,
depletion and amortization increased in 1999 due to depreciation and depletion
associated with various acquisitions and other capital projects completed in
1998 and 1999. The changes in working capital are discussed in Management's
Discussion of Financial Position.

     Depreciation, depletion and amortization increased in 1998 from 1997 due to
goodwill amortization, depreciation and depletion associated with the Redland
acquisition and other capital projects in 1997 and 1998. The changes in working
capital are discussed in Management's Discussion of Financial Position.

CASH FLOWS FROM INVESTING

     Capital expenditures increased in 1999 due to various projects such as the
construction of the Silver Grove, Kentucky gypsum wallboard plant and the
Richmond, British Columbia and Sugar Creek, Missouri cement plant expansions.
Capital expenditures are expected to be approximately $550 million to $600
million

                                       41
<PAGE>   44

in 2000 (excluding acquisitions). The company intends to invest in projects that
maintain or improve the performance of its plants as well as in acquisition
opportunities that will enhance the company's competitive position in the U.S.
and Canada. The company expects to spend approximately $125.4 million on the
Sugar Creek, Missouri plant and be operational in early 2001. The company also
expects to spend approximately $119.6 million on the Silver Grove, Kentucky and
Palatka, Florida gypsum plants and to have the plants operational in spring 2000
and early 2001, respectively. Spending on acquisitions was below 1998 due to the
acquisition of the Seattle, Washington plant, American Flyash and the Texada
quarry in the prior year. Proceeds from the sale of non-strategic assets,
surplus land and other miscellaneous items, including the disposition of asphalt
and paving operations in Maryland, totaled $45.9 million in 1999 compared to
$22.9 million in 1998.

     Capital expenditures increased in 1998 from 1997 due to the modernization
of the Sugar Creek, Missouri and Richmond, British Columbia plants. Spending for
acquisitions increased in 1998 due to the Seattle, Washington plant, American
Flyash and the Texada quarry acquisitions. Proceeds from the sale of non-
strategic assets, surplus land and other miscellaneous items totaled $22.9
million for 1998 and $18.9 million for 1997.

CASH FLOWS FROM FINANCING

     On June 3, 1998, the company consummated the acquisition of a number of
construction materials businesses from Lafarge S.A., its majority shareholder,
for $690 million in cash. This use of cash is reflected in the Consolidated
Statements of Cash Flows as a repayment of a $690 million payable to Lafarge
S.A., which was replaced in July 1998 with long-term senior notes with a face
value of $650 million and proceeds, net of original issue discount, of $643
million.

     The financial position of the company improved during 1999 with a reduction
in net debt of $80 million. This reduction was the result of improved earnings
from operations, proceeds from divestments of non-strategic assets and the
reinvestment of dividends by Lafarge S.A.

     The company has access to a wide variety of short-term and long-term
financing alternatives in both the U.S. and Canada and has a syndicated,
committed, five-year revolving credit facility with nine participants totaling
$300 million. At December 31, 1999 and 1998, no amounts were outstanding under
these credit facilities.

                 MANAGEMENT'S DISCUSSION OF FINANCIAL POSITION

     The Consolidated Balance Sheets summarize the company's financial position
at December 31, 1999 and 1998.

     Lafarge S.A., the majority stockholder of the company, acquired Redland PLC
in December 1997. The company acquired Redland from Lafarge S.A. on June 3, 1998
for $690 million. Since the company acquired Redland from its majority
shareholder, the acquisition was accounted for similar to a pooling of interests
for financial reporting purposes. Accordingly, Redland assets and liabilities
were transferred to the company at Lafarge S.A.'s historical cost, which
approximates the purchase price paid by the company. The accompanying
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998
include the balance sheets of Redland.

     The company is exposed to foreign currency exchange rate risk inherent in
its Canadian revenues, expenses, assets and liabilities denominated in Canadian
dollars, as well as interest rate risk inherent in the company's debt. As more
fully described in the Notes to Consolidated Financial Statements, the company
primarily uses fixed rate debt instruments to reduce the risk of exposure to
changes in interest rates and has used forward treasury lock agreements to hedge
interest rate changes on anticipated debt issuances. The value reported for
Canadian dollar denominated net assets increased from December 31, 1998 as a
result of an increase in the value of the Canadian dollar relative to the U.S.
dollar. At December 31, 1999, the U.S. dollar equivalent of a Canadian dollar
was $0.69 versus $0.65 at December 31, 1998. Based on 1999 results, if the value
of the Canadian dollar relative to the U.S. dollar changed by 10 percent, the
consolidated net assets of
                                       42
<PAGE>   45

the company would change by approximately 5.7 percent and net income would
change by approximately 3.5 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 ($8.3 million), increased
$46.6 million from December 31, 1998 to December 31, 1999. Accounts receivable,
excluding an exchange rate impact of $8.7 million, increased $77.9 million
primarily due to higher levels of sales in November and December and
acquisitions during the year. Inventories increased $34.4 million, excluding the
exchange rate impact of $5.9 million, due to the growth of the business and a
return to more normal levels of inventory. The increase of $50.5 million,
excluding the exchange rate impact of $7.4 million, in accounts payable and
accrued liabilities is mainly due to the growth of the company and the timing of
purchases and payments. Income taxes payable increased $42.6 million, excluding
the exchange rate impact of $0.9 million, due to increased levels of income and
timing of payments.

     Net property, plant and equipment increased $191.4 million during 1999,
excluding the exchange rate impact of $26.2 million, primarily due to the
modernization of the Richmond, British Columbia cement plant, several
acquisitions in the construction materials operations and the acquisition of the
Canadian gypsum operations. These acquisitions were partly offset by the
divestment of asphalt and paving operations in Maryland. Capital expenditures
and acquisitions of fixed assets totaled $374.0 million. The excess of cost over
net tangible assets of businesses acquired relates primarily to acquisitions
throughout the U.S. and the acquisition of the Redland operations in 1998.

     The company's capitalization is summarized in the following table:

<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                                              --------------
                                                              1998     1997
                                                              -----    -----
<S>                                                           <C>      <C>
Long-term debt..............................................   25.8%    30.2%
Other long-term liabilities.................................   12.5%    13.0%
Shareholders' equity........................................   61.7%    56.8%
                                                              -----    -----
          Total capitalization..............................  100.0%   100.0%
                                                              =====    =====
</TABLE>

     The decrease in long-term debt is discussed in Management's Discussion of
Cash Flows. 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
1999, shareholders' equity increased by $307.7 million, mainly from net income
of $275.4 million and a change in the foreign currency translation adjustment of
$52.8 million (resulting from a 6 percent increase in the value of the Canadian
dollar relative to the U.S. dollar). These were partially offset by dividend
payments, net of reinvestments, of $24.2 million. Dividend reinvestments
increased in 1999 due to Lafarge S.A. reinvesting 100 percent of its dividends.

     In 1998, shareholders' equity increased by $159.5 million, mainly from net
income of $235.5 million and $10.6 million from the exercise of stock options.
These were partially offset by an increase in foreign currency translation
adjustments of $55.3 million (resulting from a 7 percent decrease in the value
of the Canadian dollar relative to the U.S. dollar) and dividend payments, net
of reinvestments of $33.1 million.

     Common equity interests include the company's $1.00 par value per share of
Common Stock ("Common Stock") and the Lafarge Canada Inc. Exchangeable
Preference Shares ("Exchangeable Shares"), which are exchangeable into Common
Stock of the company and have comparable voting, dividend and liquidation
rights. The company's Common Stock is traded on the New York Stock Exchange
under the ticker symbol "LAF" and on the Toronto Stock Exchange under the ticker
symbol "LCI.PR.E."

                                       43
<PAGE>   46

     The company adopted the Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" in 1998. Comprehensive income, defined as
the total of net income and all other non-owner changes in equity (such as
foreign currency translation adjustments), is reported on an annual basis in the
Consolidated Statements of Comprehensive Income. Accumulated Other Comprehensive
Income (accumulated foreign currency translation adjustments) is reported in the
Consolidated Balance Sheets and in the Consolidated Statements of Shareholders'
Equity.

     The following table reflects the range of high and low closing prices of
Common Stock by quarter for 1999 and 1998 as quoted on the New York Stock
Exchange:

<TABLE>
<CAPTION>
                                                                  QUARTERS ENDED
                                                     -----------------------------------------
                                                     MARCH       JUNE       SEPT.         DEC.
                                                      31          30         30            31
                                                     -----       ----       -----         ----
<S>                                                  <C>         <C>        <C>           <C>
1999 Stock Prices
       High...................................        $40 11/16  $37 1/4     $35 1/16     $31 1/8
       Low....................................         27 1/8     27 1/16     26 3/8      251 15/16
1998 Stock Prices
       High...................................        $39 1/16   $41 7/8     $39 13/16    $40 1/2
       Low....................................         29 7/8     35          27 1/2       24 5/16
</TABLE>

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

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31
                                                     --------------------------------------
                                                       1999           1998           1997
                                                     --------       --------       --------
<S>                                                  <C>            <C>            <C>
Common equity dividends.......................       $ 43,696       $ 36,880       $ 30,019
Less dividend reinvestments...................        (19,474)        (3,736)        (7,010)
                                                     --------       --------       --------
Net cash dividend payments....................       $ 24,222       $ 33,144       $ 23,009
                                                     ========       ========       ========
Common equity dividends per share.............       $   0.60       $   0.51       $   0.42
                                                     ========       ========       ========
</TABLE>

     The company increased the quarterly dividend per share to $0.15 at its
October 1998 Board of Directors meeting. 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 the company's financial condition and results of operations.

     The company's net sales increased 12 percent in 1996 due to higher product
shipments and prices as well as the effect of acquisitions (in late 1995 and
early 1996) in the construction materials operations. Net sales also improved
from the entry into the gypsum wallboard business. Net sales in 1997 increased
10 percent mainly due to increased product shipments, higher cement and
ready-mixed concrete prices and the first full year of operations of the gypsum
wallboard business. In 1998, net sales increased by 36 percent primarily due to
the addition of the Redland operations as well as increased shipments and
prices. In 1999, sales increased by 8 percent primarily due to favorable
economic conditions supporting demand in most segments. Average selling prices
also increased in all three segments, most notably in the Gypsum segment, where
average selling prices increased by 22 percent. See the Management's Discussion
of Income for additional details.

     Inflation rates in recent years have not been a significant factor in the
company's net sales or earnings growth. The company continually attempts to
offset the effect of inflation by improving operating efficiencies, especially
in the areas of selling and administrative expenses, productivity and energy
costs. The company competes with other suppliers of its products in all of its
markets. The ability to recover increasing costs by obtaining higher prices for
the company's 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.

                                       44
<PAGE>   47

     Net cash provided by operations consists of net income adjusted primarily
for depreciation and changes in operating working capital. The company is in a
capital-intensive industry and as a result recognizes large amounts of
depreciation. The company has used its cash provided by operations to expand its
markets, improve the performance of its plants and other operating equipment and
for the years prior to the Redland acquisition, to reduce debt.

     During 1998, the company acquired Redland for $690 million. Since the
acquisition was from the company's majority shareholder, it was treated similar
to a pooling of interests and Redland's balance sheet was consolidated with the
company's balance sheet at December 31, 1997 and Redland's operating results
were consolidated with the company for the full year 1998.

     Capital expenditures and acquisitions, excluding Redland, totaled $1,189.9
million over the past five years, which included: the purchase of three gypsum
wallboard facilities and the construction of a new wallboard plant in Kentucky;
a cement plant and related limestone quarry; cement plant projects to increase
production capacity and reduce costs; the installation of receiving and handling
facilities of 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 acquisition of asphalt paving
operations; the acquisition of ready-mixed concrete plants and aggregate
operations; and the modernization of the construction materials mobile equipment
fleet.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Information required by this Item is contained in "Management's Discussion
of Financial Position" in Management's Discussion and Analysis of Financial
Condition and Results of Operations reported in Item 7 of Part II of this Annual
Report and is incorporated herein by reference, and in the "Debt" note of Notes
to Consolidated Financial Statements reported in Item 8 of Part II of this
Annual Report and is incorporated herein by reference.

                                       45
<PAGE>   48

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Financial Report:
  Report of Independent Public Accountants, Arthur Andersen
     LLP....................................................   47

Consolidated Financial Statements:
  Consolidated Balance Sheets as of December 31, 1999 and
     1998...................................................   48
  Consolidated Statements of Income for the Years Ended
     December 31, 1999, 1998 and 1997.......................   49
  Consolidated Statements of Shareholders' Equity for the
     Years Ended December 31, 1999, 1998 and 1997...........   50
  Consolidated Statements of Comprehensive Income for the
     Years Ended December 31, 1999, 1998 and 1997...........   51
  Consolidated Statements of Cash Flows for the Years Ended
     December 31, 1999, 1998 and 1997.......................   52
  Notes to Consolidated Financial Statements................   53

Financial Statement Schedule:
  Schedule II -- Consolidated Valuation and Qualifying
     Accounts for the Years Ended December 31, 1999, 1998
     and 1997...............................................   75

  All other schedules are omitted because they are not
     applicable.
</TABLE>

                                       46
<PAGE>   49

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Lafarge Corporation:

     We have audited the accompanying consolidated balance sheets of Lafarge
Corporation (a Maryland corporation) and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of income, cash flows,
shareholders' equity and comprehensive income for each of the three years in the
period ended December 31, 1999. 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 Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, 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 26, 2000

                                       47
<PAGE>   50

                      LAFARGE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                    DECEMBER 31
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
ASSETS
Cash and cash equivalents...................................  $  237,812   $  271,138
Short-term investments......................................      91,626       17,070
Receivables, net............................................     421,796      335,229
Inventories.................................................     288,200      247,944
Deferred tax assets.........................................      43,015       40,738
Other current assets........................................      53,052       25,772
                                                              ----------   ----------
          Total current assets..............................   1,135,501      937,891
Property, plant and equipment, net..........................   1,618,319    1,400,753
Excess of cost over net tangible assets of businesses
  acquired, net.............................................     335,464      353,548
Other assets................................................     214,962      212,605
                                                              ----------   ----------
          TOTAL ASSETS......................................  $3,304,246   $2,904,797
                                                              ==========   ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities....................  $  411,677   $  353,736
Income taxes payable........................................      60,222       16,681
Short-term borrowings and current portion of long-term
  debt......................................................      38,344       44,560
                                                              ----------   ----------
          Total current liabilities.........................     510,243      414,977
Long-term debt..............................................     719,781      751,151
Other long-term liabilities.................................     351,338      323,495
                                                              ----------   ----------
          Total Liabilities.................................   1,581,362    1,489,623
                                                              ----------   ----------
Common Equity
  Common Stock ($1.00 par value; authorized 110.1 million
     shares; issued 68.7 and 67.4 million shares,
     respectively)..........................................      68,686       67,370
  Exchangeable Shares (no par or stated value; authorized
     24.3 million shares; issued 4.5 and 4.9 million shares,
     respectively)..........................................      32,957       35,814
Additional paid-in capital..................................     697,324      672,555
Retained earnings...........................................   1,023,736      792,058
Accumulated other comprehensive income (loss)...............     (99,819)    (152,623)
                                                              ----------   ----------
          Total Shareholders' Equity........................   1,722,884    1,415,174
                                                              ----------   ----------
          TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........  $3,304,246   $2,904,797
                                                              ==========   ==========
</TABLE>

                See Notes to Consolidated Financial Statements.
                                       48
<PAGE>   51

                      LAFARGE CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
             (in thousands, except amounts per common equity share)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31
                                                        --------------------------------------------
                                                           1999             1998             1997
                                                        ----------       ----------       ----------
<S>                                                     <C>              <C>              <C>
NET SALES........................................       $2,654,361       $2,448,205       $1,806,351
                                                        ----------       ----------       ----------
Costs and expenses
  Cost of goods sold.............................        1,929,045        1,798,986        1,335,206
  Selling and administrative.....................          235,027          216,829          160,963
  Amortization of goodwill.......................           17,164           17,586            3,748
  Other (income) expense, net....................           (8,492)           7,757            5,536
  Interest expense...............................           62,736           47,652           19,949
  Interest income................................          (17,905)         (20,429)         (13,285)
                                                        ----------       ----------       ----------
          Total costs and expenses...............        2,217,575        2,068,381        1,512,117
                                                        ----------       ----------       ----------
Earnings before income taxes.....................          436,786          379,824          294,234
Income taxes.....................................          161,412          144,324          112,258
                                                        ----------       ----------       ----------
NET INCOME.......................................       $  275,374       $  235,500       $  181,976
                                                        ==========       ==========       ==========
NET INCOME PER SHARE-BASIC.......................       $     3.79       $     3.27       $     2.56
                                                        ==========       ==========       ==========
NET INCOME PER SHARE-DILUTED.....................       $     3.77       $     3.24       $     2.54
                                                        ==========       ==========       ==========
DIVIDENDS PER SHARE..............................       $     0.60       $     0.51       $     0.42
                                                        ==========       ==========       ==========
</TABLE>

                See Notes to Consolidated Financial Statements.
                                       49
<PAGE>   52

                      LAFARGE CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31
                                    ---------------------------------------------------------------
                                           1999                  1998                  1997
                                    -------------------   -------------------   -------------------
                                      AMOUNT     SHARES     AMOUNT     SHARES     AMOUNT     SHARES
                                    ----------   ------   ----------   ------   ----------   ------
<S>                                 <C>          <C>      <C>          <C>      <C>          <C>
COMMON EQUITY INTERESTS
  COMMON STOCK
     Balance at January 1.........  $   67,370   67,370   $   65,268   65,268   $   62,590   62,590
     Issuance of shares for:
       Dividend reinvestment
          plans...................         677      677           83       83          256      256
       Employee stock purchase
          plan....................          47       47           31       31           33       33
     Conversion of Exchangeable
       Shares.....................         502      502        1,527    1,527        1,421    1,421
     Exercise of stock options....          90       90          461      461          968      968
                                    ----------   ------   ----------   ------   ----------   ------
     Balance at December 31.......  $   68,686   68,686   $   67,370   67,370   $   65,268   65,268
                                    ==========   ======   ==========   ======   ==========   ======
  EXCHANGEABLE SHARES
     Balance at January 1.........  $   35,814    4,936   $   45,259    6,409   $   53,817    7,764
     Issuance of shares for:
       Dividend reinvestment
          plans...................         505       17          966       29        1,035       40
       Employee stock purchase
          plan....................         147       21          172       25          180       26
     Conversion of shares.........      (3,509)    (502)     (10,583)  (1,527)      (9,773)  (1,421)
                                    ----------   ------   ----------   ------   ----------   ------
     Balance at December 31.......  $   32,957    4,472   $   35,814    4,936   $   45,259    6,409
                                    ==========   ======   ==========   ======   ==========   ======
ADDITIONAL PAID-IN CAPITAL
  Balance at January 1............  $  672,555            $  649,082            $  615,993
  Issuance of Common Stock and/or
     Exchangeable Shares for:
       Dividend reinvestment
          plans...................      18,292                 2,687                 5,719
       Employee stock purchase
          plan....................       2,055                 1,923                 1,241
  Conversion of Exchangeable
     Shares.......................       3,007                 9,056                 8,352
  Exercise of stock options.......       1,415                10,170                17,777
  Other...........................          --                  (363)                   --
                                    ----------            ----------            ----------
  Balance at December 31..........  $  697,324            $  672,555            $  649,082
                                    ==========            ==========            ==========
RETAINED EARNINGS
  Balance at January 1............  $  792,058            $  593,438            $  441,481
  Net Income......................     275,374               235,500               181,976
  Dividends -- common equity
     interests....................     (43,696)              (36,880)              (30,019)
                                    ----------            ----------            ----------
  Balance at December 31..........  $1,023,736            $  792,058            $  593,438
                                    ==========            ==========            ==========
ACCUMULATED OTHER COMPREHENSIVE
  INCOME (LOSS)
  Balance at January 1............  $ (152,623)           $  (97,359)           $  (63,342)
  Foreign currency translation
     adjustments..................      52,804               (55,264)              (34,017)
                                    ----------            ----------            ----------
  Balance at December 31..........  $  (99,819)           $ (152,623)           $  (97,359)
                                    ==========            ==========            ==========
TOTAL SHAREHOLDERS' EQUITY........  $1,722,884            $1,415,174            $1,255,688
                                    ==========            ==========            ==========
</TABLE>

                See Notes to Consolidated Financial Statements.
                                       50
<PAGE>   53

                      LAFARGE CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31
                                                         ------------------------------------------
                                                           1999             1998             1997
                                                         --------         --------         --------
<S>                                                      <C>              <C>              <C>
NET INCOME........................................       $275,374         $235,500         $181,976
  Foreign currency translation adjustments........         52,804          (55,264)         (34,017)
                                                         --------         --------         --------
COMPREHENSIVE INCOME..............................       $328,178         $180,236         $147,959
                                                         ========         ========         ========
</TABLE>

                See Notes to Consolidated Financial Statements.
                                       51
<PAGE>   54

                      LAFARGE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31
                                                            ---------------------------------
                                                              1999        1998        1997
                                                            ---------   ---------   ---------
<S>                                                         <C>         <C>         <C>
CASH FLOWS FROM OPERATIONS
  Net income..............................................  $ 275,374   $ 235,500   $ 181,976
  Adjustments to reconcile net income to net cash provided
     by operations
     Depreciation, depletion and amortization.............    168,272     156,782     106,304
     Provision for bad debts..............................      2,490       3,395       2,365
     Deferred income taxes................................     10,457      17,331       9,815
     Gain on sale of assets...............................    (10,750)     (2,964)     (6,038)
     Other noncash charges and credits, net...............      6,507      (9,948)      2,512
     Net change in operating working capital (see
       below)*............................................    (53,832)    (23,971)     39,052
                                                            ---------   ---------   ---------
NET CASH PROVIDED BY OPERATIONS...........................    398,518     376,125     335,986
                                                            ---------   ---------   ---------
CASH FLOWS FROM INVESTING
  Capital expenditures....................................   (315,724)   (224,353)   (123,970)
  Acquisitions............................................    (58,268)    (99,280)     (8,817)
  Redemptions (purchases) of short-term investments,
     net..................................................    (74,556)    138,298     (62,872)
  Proceeds from property, plant and equipment
     dispositions.........................................     45,939      22,910      18,947
  Other...................................................     12,603        (541)      7,110
                                                            ---------   ---------   ---------
NET CASH USED FOR INVESTING...............................   (390,006)   (162,966)   (169,602)
                                                            ---------   ---------   ---------
CASH FLOWS FROM FINANCING
  Repayment of Lafarge S.A. payable.......................         --    (690,000)         --
  Issuance of senior notes, net of discount...............         --     643,464          --
  Other repayment of long-term debt.......................    (31,370)    (30,636)    (16,758)
  Issuance (repayment) of short-term borrowings, net......     (9,491)     14,730     (77,850)
  Issuance of equity securities, net......................      3,944      12,757      20,199
  Dividends, net of reinvestments.........................    (24,222)    (33,144)    (23,009)
  Financing costs and other...............................         --     (12,818)         --
                                                            ---------   ---------   ---------
NET CASH CONSUMED BY FINANCING............................    (61,139)    (95,647)    (97,418)
                                                            ---------   ---------   ---------
Effect of exchange rate changes...........................     19,301     (20,537)    (11,650)
                                                            ---------   ---------   ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......    (33,326)     96,975      57,316
CASH AND CASH EQUIVALENTS AT JANUARY 1....................    271,138     174,163     116,847
                                                            ---------   ---------   ---------
CASH AND CASH EQUIVALENTS AT DECEMBER 31..................  $ 237,812   $ 271,138   $ 174,163
                                                            =========   =========   =========
*ANALYSIS OF CHANGES IN OPERATING WORKING CAPITAL ITEMS
  Receivables, net........................................  $ (85,211)  $ (18,217)  $  22,779
  Inventories.............................................    (33,842)    (16,566)     (7,692)
  Other current assets....................................    (24,554)       (822)     (2,287)
  Accounts payable and accrued liabilities................     46,490      28,789      19,262
  Income taxes payable....................................     43,285     (17,155)      6,990
                                                            ---------   ---------   ---------
NET CHANGE IN OPERATING WORKING CAPITAL...................  $ (53,832)  $ (23,971)  $  39,052
                                                            =========   =========   =========
</TABLE>

                See Notes to Consolidated Financial Statements.
                                       52
<PAGE>   55

                      LAFARGE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Lafarge Corporation, together with its subsidiaries ("Lafarge" or the
"company"), is North America's largest diversified supplier of construction
materials. The company's major operating subsidiary, Lafarge Canada Inc.
("LCI"), operates in Canada. The company's core businesses are organized into
three operating segments: Construction Materials, Cement and Lafarge Gypsum. 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. 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 substitute fuels and raw materials.
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 ("Exchangeable Shares").

     On June 3, 1998, the company acquired certain Redland PLC businesses in
North America ("Redland") from Lafarge S.A. for $690 million. Redland produces
and sells aggregate, asphalt, ready-mixed concrete and other concrete products
and performs paving and related contracting services. Redland operates primarily
in the U.S. and owns two quarry operations in Ontario, Canada.

ACCOUNTING AND FINANCIAL REPORTING POLICIES

  Estimates

     The preparation of financial statements in conformity with 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. Certain reclassifications have been made to prior years to conform to
the 1999 presentation.

  Foreign Currency Translation

     The company uses the U.S. dollar as its functional currency. 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 are included in "accumulated other comprehensive income
(loss)" in the Consolidated Balance Sheets and in the Consolidated Statements of
Shareholders' Equity.

  Revenue Recognition

     Revenue from the sale of cement, concrete, concrete products, aggregate and
gypsum wallboard 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.

                                       53
<PAGE>   56
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

  Derivative Financial Instruments

     The company at times uses derivative financial instruments ("Derivatives")
in order to hedge the impact of changes in interest rates. These Derivatives are
not held or issued for trading purposes.

     At December 31, 1998, the company maintained one $25 million (notional
amount) interest swap contract which matured in 1999. The company did not
utilize any other derivative financial instruments during 1999. As of December
31, 1999, the company did not have any derivative financial instruments
outstanding.

     The company has previously entered into forward contracts used to hedge
interest rate changes on anticipated debt issuances. The differentials to be
received or paid under such contracts designated as forward interest rate hedges
were recognized in income over the life of the associated debt as adjustments to
interest expense.

  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.

  Concentration of Credit Risk

     Financial instruments which potentially subject the company to
concentrations of credit risk are primarily receivables, cash equivalents and
short-term investments. 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 is based upon
analysis of economic trends in the construction industry and the expected
collectibility of overall receivables. The company places its cash equivalents
and short-term investments in investment grade, short-term debt instruments and
limits the amount of credit exposure to any one commercial issuer.

  Inventories

     Inventories are valued at 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.

  Excess of Cost Over Net Tangible Assets of Businesses Acquired

     The excess of cost over fair value of net tangible assets of businesses
acquired ("goodwill") is amortized using the straight-line method over periods
not exceeding 40 years. Goodwill related to Redland businesses acquired is
amortized over lives averaging 27 years. The company continually evaluates
whether events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant
                                       54
<PAGE>   57
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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, 1999. The amortization recorded for 1999, 1998 and 1997 was $17.2
million, $17.6 million and $3.7 million, respectively. Accumulated amortization
at December 31, 1999 and 1998 was $79.1 million and $61.9 million, respectively.

  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.

  Income Taxes

     Deferred income taxes are determined by the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109").

  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.

  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 $7.5 million, $7.4 million
and $7.2 million for 1999, 1998 and 1997, respectively.

  Interest

     Interest of $4.7 million, $3.6 million and $1.4 million was capitalized in
1999, 1998 and 1997, respectively.

  Comprehensive Income

     The company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," in 1998. Comprehensive income as presented in
the Consolidated Statements of Comprehensive Income is defined as the total of
net income and all other non-owner changes in equity (foreign currency
translation adjustments in Lafarge's case).

  Net Income Per Common Equity Share

     The calculation of basic net income per common equity share is in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
per Share," which the company adopted in 1997 and is

                                       55
<PAGE>   58
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

based on the weighted average number of shares of Common Stock and the
Exchangeable Shares outstanding in each period. The weighted average number of
shares and share equivalents outstanding was (in thousands) 72,637, 72,071 and
71,128 in 1999, 1998 and 1997, respectively.

     The weighted average number of shares and share equivalents outstanding,
assuming dilution, was (in thousands) 73,022, 72,665 and 71,695 in 1999, 1998
and 1997, respectively.

  Accounting for Stock-Based Compensation

     The company accounts for employee stock options using the method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." 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 Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), 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 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," which
defers the effective date of SFAS No. 133 adoption by the company to no later
than January 1, 2001. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement and requires that a company
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting. The company is reviewing SFAS No. 133 and does not
currently expect it to materially impact its financial condition or results of
operations.

  Acquisitions

     Lafarge S.A., the majority stockholder of the company, acquired Redland PLC
in December 1997. Since the company acquired Redland from its majority
stockholder, the acquisition is accounted for similar to a pooling of interests
for financial reporting purposes. Accordingly, as of December 31, 1997, Redland
assets and liabilities acquired by the company from Lafarge S.A. were
transferred to the company at Lafarge S.A.'s
historical cost, which approximates the $690 million purchase price paid by the
company. The company's results of operations include Redland from January 1,
1998 forward. A payable to Lafarge S.A. for $690 million was recorded as part of
the acquisition. A portion of this payable ($40 million) was repaid in June 1998
and the balance of $650 million was financed in June 1998 with an
interest-bearing short-term note to Lafarge S.A. This note was refinanced in
July 1998 with long-term public debt.

     The Redland businesses acquired by the company consist of Western Mobile
Inc. of Denver, Colorado; Redland Genstar Inc. of Towson, Maryland; and the
aggregate operations of Redland Quarries Inc. of Hamilton, Ontario. The
operations acquired posted combined revenues of approximately $576 million and
$572 million in 1999 and 1998, respectively.

     Redland is engaged in the production and sale of aggregate, asphalt,
ready-mixed concrete and other concrete products and performs paving and related
contracting services. Redland operates primarily in the
                                       56
<PAGE>   59
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

U.S. and owns two quarry operations in Ontario, Canada. The primary U.S. markets
are in the states of Colorado, New Mexico, Maryland and New York.

     The following unaudited 1997 pro forma financial information for the
company gives effect to the Redland acquisition as if Lafarge S.A. had purchased
it on January 1, 1997 (in thousands, except per share amounts). 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. The pro forma results of operations
are not necessarily indicative of the combined earnings and results of
operations had the acquisition been completed at the beginning of 1997, nor is
such information necessarily indicative of future results of operations.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED
                                                                DECEMBER 31, 1997
                                                                -----------------
          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                 (UNAUDITED)
<S>                                                             <C>
Pro-forma:
Net Sales...................................................       $2,323,407
Net Income..................................................       $  184,434
Net Income per share -- basic...............................       $     2.59
Net Income per share -- diluted.............................       $     2.57
</TABLE>

     On October 20, 1998, the company completed the acquisition from Holnam,
Inc. of a cement plant in Seattle, Washington and a related limestone quarry
operation located on Texada Island, British Columbia.

     In January 1999, the company completed the acquisition of a gypsum
wallboard plant located in Newfoundland, Canada.

     In late January 1999, the company announced plans to construct a $90
million state-of-the-art gypsum wallboard plant in northern Kentucky, just
outside of Cincinnati.

     On March 30, 1999, the company completed the acquisition of Corn
Construction Co., an aggregate and asphalt paving business in New Mexico and
southern Colorado.

     In September 1999, the company announced that Lafarge Gypsum will build a
new $85 million gypsum wallboard manufacturing facility in northern Florida.

     In late 1999, the company sold under-performing and non-strategic asphalt
and paving operations in Maryland for approximately $25 million.

RECEIVABLES

     Receivables consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1999        1998
                                                              --------    --------
<S>                                                           <C>         <C>
Trade and notes receivable..................................  $440,645    $349,478
Retainage on long-term contracts............................     8,823      13,602
Allowances..................................................   (27,672)    (27,851)
                                                              --------    --------
          TOTAL RECEIVABLES, NET............................  $421,796    $335,229
                                                              ========    ========
</TABLE>

                                       57
<PAGE>   60
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

INVENTORIES

     Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1999        1998
                                                              --------    --------
<S>                                                           <C>         <C>
Finished products...........................................  $154,567    $129,838
Work in process.............................................    16,639      10,878
Raw materials and fuel......................................    52,650      55,760
Maintenance and operating supplies..........................    64,344      51,468
                                                              --------    --------
          TOTAL INVENTORIES.................................  $288,200    $247,944
                                                              ========    ========
</TABLE>

     Included in the finished products, work in process and raw materials and
fuel categories are inventories valued using the LIFO method of $69.8 million
and $64.1 million at December 31, 1999 and 1998, respectively. If these
inventories were valued using the average cost method, such inventories would
have decreased by $7.4 million and $4.4 million, respectively.

PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                            -------------------------
                                                               1999          1998
                                                            -----------   -----------
<S>                                                         <C>           <C>
Land and mineral deposits.................................  $   396,465   $   391,532
Buildings, machinery and equipment........................    2,299,874     1,973,392
Construction in progress..................................      234,240       184,748
                                                            -----------   -----------
Property, plant and equipment, at cost....................    2,930,579     2,549,672
Accumulated depreciation and depletion....................   (1,312,260)   (1,148,919)
                                                            -----------   -----------
          TOTAL PROPERTY, PLANT AND EQUIPMENT, NET........  $ 1,618,319   $ 1,400,753
                                                            ===========   ===========
</TABLE>

OTHER ASSETS

     Other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Long-term receivables.......................................  $ 19,174   $ 25,791
Investments in unconsolidated companies.....................    27,942     22,913
Prepaid pension asset.......................................   101,948     93,519
Property held for sale......................................    14,463     19,510
Other.......................................................    51,435     50,872
                                                              --------   --------
          TOTAL OTHER ASSETS................................  $214,962   $212,605
                                                              ========   ========
</TABLE>

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

                                       58
<PAGE>   61
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Trade accounts payable......................................  $144,743   $123,063
Accrued payroll expense.....................................    70,926     47,454
Bank overdrafts.............................................    36,667     21,266
Other accrued liabilities...................................   159,341    161,953
                                                              --------   --------
          TOTAL ACCOUNTS PAYABLE AND ACCRUED LIABILITIES....  $411,677   $353,736
                                                              ========   ========
</TABLE>

DEBT

     Debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
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
  original issue discount. The average effective interest
  rate is 6.9 percent.......................................  $644,166   $643,464
Medium-term notes maturing in various amounts between 2000
  and 2006, bearing interest at fixed rates which range from
  9.3 percent to 9.8 percent................................    71,500     93,500
Tax-exempt bonds maturing in various amounts between 2000
  and 2026, bearing interest at floating rates which range
  from 3.6 percent to 6.6 percent...........................    33,500     38,383
Short-term borrowings.......................................        --     14,730
Other.......................................................     8,959      5,634
                                                              --------   --------
     SUBTOTAL...............................................   758,125    795,711
Less short-term borrowings and current portion of long-term
  debt, net of original issue discount of $702..............   (38,344)   (44,560)
                                                              --------   --------
          TOTAL LONG-TERM DEBT..............................  $719,781   $751,151
                                                              ========   ========
</TABLE>

     The fair value of debt at December 31, 1999 and 1998, respectively, was
approximately $717.2 million and $819.7 million compared with $758.1 million and
$795.7 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.

                                       59
<PAGE>   62
                      LAFARGE CORPORATION 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, 2004 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                           REPAYMENTS
                                                           ----------
<S>                                                        <C>
2000.....................................................   $ 39,046
2001.....................................................   $ 30,732
2002.....................................................   $ 20,267
2003.....................................................   $    533
2004.....................................................   $    533
Thereafter...............................................   $672,848
Less original issue discount.............................   $ (5,834)
                                                            --------
          TOTAL..........................................   $758,125
                                                            ========
</TABLE>

     The company has a syndicated, committed revolving credit facility totaling
$300 million extending through December 8, 2003. At the end of 1999, no amounts
were outstanding. The company is required to pay annual commitment fees of 0.10
percent of the total amount of the facilities. Borrowings made under the
revolving credit facilities will bear interest at variable rates based on a
bank's prime lending rate or the applicable federal funds rate and are subject
to certain conditions.

     In July 1998, the company issued $650 million in long-term senior notes to
finance the acquisition of Redland's U.S. operations. The all-in average cost of
these notes including the original issue discount, a treasury lock hedge and all
issuance costs is 6.9 percent. In order to hedge the risk of interest rate
fluctuations, the company entered into forward treasury lock agreements in May
and June 1998 totaling a notional $640 million. Losses on these agreements have
been deferred and are being amortized over the life of the debt.

     The company's debt agreements require the maintenance of certain financial
ratios relating to fixed charge coverage and leverage. At December 31, 1999, the
company was in compliance with these requirements.

OTHER LONG-TERM LIABILITIES

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

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred income taxes.......................................  $118,699   $110,398
Minority interests..........................................     5,606      6,058
Accrued postretirement benefit cost.........................   153,476    149,794
Accrued pension liability...................................    29,532     24,660
Other.......................................................    44,025     32,585
                                                              --------   --------
          TOTAL OTHER LONG-TERM LIABILITIES.................  $351,338   $323,495
                                                              ========   ========
</TABLE>

COMMON EQUITY INTERESTS

     Holders of Exchangeable Shares have voting, dividend and liquidation rights
that parallel those of holders of the company's Common Stock. The Exchangeable
Shares may be converted to the company's 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 company's Common Stock. The company has agreed
not to pay dividends on its Common Stock without causing LCI to declare an
equivalent dividend in Canadian dollars on

                                       60
<PAGE>   63
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

the Exchangeable Shares. Dividend payments 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, 1999, the company had reserved for issuance approximately
8.9 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 (6.2 million), employee stock purchase plan (1.5
million) and issuances pursuant to the company's optional stock dividend plan
(1.0 million).

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

     At December 31, 1999, the company maintained two stock-based compensation
plans -- a fixed stock option plan and an employee stock purchase plan. The
company applies APB Opinion No. 25 and related interpretations in accounting for
these plans. Accordingly, no compensation cost has been recognized for these
plans. If compensation cost for the company's stock-based compensation plans had
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method described by SFAS No. 123, the company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31
                                                        ------------------------------
                                                          1999       1998       1997
                                                        --------   --------   --------
<S>                                                     <C>        <C>        <C>
NET INCOME
  As reported.........................................  $275,374   $235,500   $181,976
  Pro forma...........................................  $271,976   $232,567   $180,402
BASIC EARNINGS PER SHARE
  As reported.........................................  $   3.79   $   3.27   $   2.56
  Pro forma...........................................  $   3.74   $   3.23   $   2.54
DILUTED EARNINGS PER SHARE
  As reported.........................................  $   3.77   $   3.24   $   2.54
  Pro forma...........................................  $   3.72   $   3.19   $   2.51
</TABLE>

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

     Under the fixed stock option plan, options to purchase shares of the
company's Common Stock have been granted to key employees and directors of the
company at option prices based on the market price of the securities at the date
of grant. One-fourth of the employee options granted is exercisable at the end
of each year following the date of grant. Director options are exercisable based
on the length of a director's service on the company's Board of Directors and
become fully exercisable when a director has served on the Board for over four
years. The options expire ten years from the date of grant.

     The fair value of each option grant is estimated on the date of grant for
purposes of the pro forma disclosures shown above using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants made in 1999, 1998 and 1997, respectively: dividend yield of 1.57, 1.45
and

                                       61
<PAGE>   64
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

1.90 percent; expected volatility of 28.5, 25.8 and 26.0 percent; risk-free
interest rates of 4.90, 5.80 and 6.47 percent; and expected lives of 5.4 for all
three years.

     A summary of the status of the company's fixed stock option plans as of
December 31, 1999, 1998 and 1997, and changes during the years ended on these
dates, is presented below:

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31
                               ---------------------------------------------------------------
                                      1999                  1998                  1997
                               -------------------   -------------------   -------------------
                                           AVERAGE               AVERAGE               AVERAGE
                                           OPTION                OPTION                OPTION
                                SHARES      PRICE     SHARES      PRICE     SHARES      PRICE
                               ---------   -------   ---------   -------   ---------   -------
<S>                            <C>         <C>       <C>         <C>       <C>         <C>
Balance outstanding at
  January 1..................  2,333,800   $24.74    1,984,050   $19.43    2,481,287   $17.87
Options granted..............    828,200    38.13      843,500    33.98      541,000    21.43
Options exercised............    (89,250)   18.90     (471,250)   18.88     (967,612)   16.50
Options canceled.............    (84,875)   34.98      (22,500)   35.21      (70,625)   20.05
                               ---------   ------    ---------   ------    ---------   ------
BALANCE OUTSTANDING AT
  DECEMBER 31................  2,987,875   $28.32    2,333,800   $24.74    1,984,050   $19.43
                               =========   ======    =========   ======    =========   ======
OPTIONS EXERCISABLE AT
  DECEMBER 31................  1,272,233   $21.82      839,725   $19.33      886,650   $18.35
                               =========   ======    =========   ======    =========   ======
WEIGHTED AVERAGE FAIR VALUE
  OF OPTIONS GRANTED DURING
  THE YEAR...................              $11.39                $10.32                $ 6.50
                                           ======                ======                ======
</TABLE>

     As of December 31, 1999, the 3.0 million fixed stock options outstanding
under the plans have an exercise price between $14.25 and $38.13 and a weighted
average remaining contractual life of 7.38 years.

     The company's employee stock purchase plan permits substantially all
employees to purchase the company's common equity interests through payroll
deductions at 90 percent of the lower of the beginning or end of plan year
market prices. In 1999, 67,800 shares were issued to employees under the plan at
a share price of $30.09, and in 1998, 56,000 shares were issued at a share price
of $22.28. At December 31, 1999 and 1998, $0.9 million and $0.7 million,
respectively, were subscribed for future share purchases.

                                       62
<PAGE>   65
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NET INCOME PER COMMON EQUITY SHARE

<TABLE>
<CAPTION>
            (FOR THE YEARS ENDED DECEMBER 31)                                  PER SHARE
         (IN THOUSANDS EXCEPT PER SHARE AMOUNT)             INCOME    SHARES    AMOUNT
         --------------------------------------            --------   ------   ---------
<S>                                                        <C>        <C>      <C>
1999
BASIC
  Net Income.............................................  $275,374   72,637     $3.79
                                                                                 =====
DILUTED
  Options................................................                385
                                                           --------   ------
  Income available to common stockholders plus assumed
     conversions.........................................  $275,374   73,022     $3.77
                                                           ========   ======     =====
1998
BASIC
  Net Income.............................................  $235,500   72,071     $3.27
                                                                                 =====
DILUTED
  Options................................................                594
                                                           --------   ------
  Income available to common stockholders plus assumed
     conversions.........................................  $235,500   72,665     $3.24
                                                           ========   ======     =====
1997
BASIC
  Net Income.............................................  $181,976   71,128     $2.56
                                                                                 =====
DILUTED
  Options................................................                567
                                                           --------   ------
  Income available to common stockholders plus assumed
     conversions.........................................  $181,976   71,695     $2.54
                                                           ========   ======     =====
</TABLE>

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

INCOME TAXES

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

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31
                                                        ------------------------------
                                                          1999       1998       1997
                                                        --------   --------   --------
<S>                                                     <C>        <C>        <C>
U.S. .................................................  $280,854   $214,608   $151,634
Canada................................................   155,932    165,216    142,600
                                                        --------   --------   --------
EARNINGS BEFORE INCOME TAXES..........................  $436,786   $379,824   $294,234
                                                        ========   ========   ========
</TABLE>

                                       63
<PAGE>   66
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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

<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31
                                                       ------------------------------
                                                         1999       1998       1997
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Current
  U.S. ..............................................  $100,152   $ 68,434   $ 46,012
  Canada.............................................    50,803     58,559     56,431
                                                       --------   --------   --------
     TOTAL CURRENT...................................   150,955    126,993    102,443
                                                       --------   --------   --------
Deferred
  U.S. ..............................................     2,472     14,083     12,200
  Canada.............................................     7,985      3,248     (2,385)
                                                       --------   --------   --------
     TOTAL DEFERRED..................................    10,457     17,331      9,815
                                                       --------   --------   --------
          TOTAL INCOME TAXES.........................  $161,412   $144,324   $112,258
                                                       ========   ========   ========
</TABLE>

     The Federal Statute of Limitations has closed for all U.S. income tax
returns through 1995. The company's Canadian federal tax liability for all
taxation years through 1997 has been reviewed and finalized by Canada Customs
and Revenue Agency (formerly Revenue Canada Taxation). During 1995, an agreement
was reached with Canada Customs and Revenue Agency 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 has been
submitted to the Competent Authorities of Canada and the U.S. and is subject to
adjustment. The purpose of the Competent Authorities is to reach agreement for
the elimination of double taxation that is not in accordance with the
Convention.

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

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31
                                                             ------------------------
                                                              1999     1998     1997
                                                             ------   ------   ------
<S>                                                          <C>      <C>      <C>
Taxes at the U.S. federal income tax rate..................  $152.9   $133.4   $103.0
U.S./Canadian tax rate differential........................     4.7      5.0      4.3
Canadian tax incentives....................................    (9.6)   (10.4)    (8.8)
State and Canadian provincial income taxes, net of federal
  benefit..................................................    19.3     17.0     11.4
Other items................................................    (5.9)    (0.7)     2.4
                                                             ------   ------   ------
PROVISION FOR INCOME TAXES.................................  $161.4   $144.3   $112.3
                                                             ======   ======   ======
</TABLE>

     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.

                                       64
<PAGE>   67
                      LAFARGE CORPORATION 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):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets:
  Reserves and other liabilities............................  $ 72,074   $ 75,274
  Other postretirement benefits.............................    63,634     59,553
  Tax loss carryforwards....................................     4,135      5,910
  Tax credit carryforwards..................................     5,192     18,994
                                                              --------   --------
Gross deferred tax assets...................................   145,035    159,731
Valuation allowance.........................................   (23,296)   (23,296)
                                                              --------   --------
NET DEFERRED TAX ASSETS.....................................   121,739    136,435
                                                              --------   --------
Deferred tax liabilities:
  Property, plant and equipment.............................   159,889    171,661
  Prepaid pension asset.....................................    23,270     28,743
  Other.....................................................    14,264      5,691
                                                              --------   --------
GROSS DEFERRED TAX LIABILITIES..............................   197,423    206,095
                                                              --------   --------
Net deferred tax liability..................................    75,684     69,660
Net deferred tax asset -- current...........................    43,015     40,738
                                                              --------   --------
NET DEFERRED TAX LIABILITY -- NONCURRENT....................  $118,699   $110,398
                                                              ========   ========
</TABLE>

     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, 1999, the company had net operating loss and tax credit
carryforwards of $10.8 million and $5.2 million, respectively. The net operating
loss carryforwards are limited to use in varying annual amounts through 2006.
The tax credit carryforwards are alternative minimum tax credits that have no
expiration date.

     Deferred tax assets include approximately $9.2 million that represent the
tax effect of transfer pricing adjustments that have not been deducted in the
U.S. pending settlement between the U.S. and Canadian Competent Authorities, as
previously noted.

     At December 31, 1999, cumulative undistributed earnings of LCI were $985.5
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. The company's 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 the Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 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 established standards for
related disclosures about products and geographic areas.

                                       65
<PAGE>   68
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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

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

     Operating segments are defined as components of an enterprise that engage
in business activities which 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 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 constructs and
paves roads. Cement 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. Lafarge 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, income taxes, interest and foreign exchange gains
and losses.

                                       66
<PAGE>   69
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     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):

<TABLE>
<CAPTION>
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Revenue:
  Construction materials
    Revenues from external customers........................  $1,416.5   $1,340.0   $  782.3
    Intersegment revenues...................................       2.7        2.3        3.1
  Cement
    Revenues from external customers........................   1,085.4    1,005.8      932.0
    Intersegment revenues...................................     117.4      117.9      118.5
  Gypsum
    Revenues from external customers........................     152.5      102.4       92.1
  Eliminations..............................................    (120.1)    (120.2)    (121.6)
                                                              --------   --------   --------
         TOTAL REVENUE......................................  $2,654.4   $2,448.2   $1,806.4
                                                              ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Income from operations:
  Construction materials (a)................................  $  189.5   $  171.3   $   80.0
  Cement (a)................................................     320.5      288.7      258.8
  Gypsum (a)................................................      41.9       20.0       13.2
  Corporate and other.......................................     (70.3)     (73.0)     (51.1)
                                                              --------   --------   --------
Earnings before interest and income taxes...................     481.6      407.0      300.9
Interest expense, net.......................................     (44.8)     (27.2)      (6.7)
                                                              --------   --------   --------
EARNINGS BEFORE INCOME TAXES................................  $  436.8   $  379.8   $  294.2
                                                              ========   ========   ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Assets:
  Construction materials....................................  $1,239.1   $1,095.3   $1,136.6
  Cement....................................................   1,098.3      956.4      795.2
    Gypsum..................................................     125.1       70.6       71.8
  Corporate, Redland goodwill and other.....................     841.7      782.5      771.3
                                                              --------   --------   --------
         TOTAL ASSETS.......................................  $3,304.2   $2,904.8   $2,774.9
                                                              ========   ========   ========
Capital expenditures:
  Construction materials....................................  $   83.8   $   66.3   $   43.6
  Cement....................................................     162.9      146.3       74.2
  Gypsum....................................................      54.4        3.0        3.3
  Corporate and other.......................................      14.6        8.7        2.9
                                                              --------   --------   --------
         TOTAL CAPITAL EXPENDITURES.........................  $  315.7   $  224.3   $  124.0
                                                              ========   ========   ========
Depreciation, depletion and amortization:
  Construction materials....................................  $   78.3   $   71.6   $   39.9
  Cement....................................................      70.5       66.2       59.9
  Gypsum....................................................       5.2        4.6        4.3
  Corporate and goodwill amortization.......................      14.3       14.4        2.2
                                                              --------   --------   --------
         TOTAL DEPRECIATION, DEPLETION AND AMORTIZATION.....  $  168.3   $  156.8   $  106.3
                                                              ========   ========   ========
</TABLE>

                                       67
<PAGE>   70
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     Information concerning product information was as follows (in millions):

<TABLE>
<CAPTION>
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Revenues from external customers:
  Cement...............................................  $1,085.4   $1,005.8   $  932.0
  Ready-mixed concrete.................................     584.1      535.9      373.8
  Aggregate............................................     299.5      307.8      130.0
  Gypsum drywall.......................................     152.5      102.4       92.1
  Other miscellaneous products.........................     532.9      496.3      278.5
                                                         --------   --------   --------
          TOTAL REVENUES...............................  $2,654.4   $2,448.2   $1,806.4
                                                         ========   ========   ========
</TABLE>

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

     Information concerning principal geographic areas was as follows (in
millions):
<TABLE>
<CAPTION>
                                                   1999                               1998                         1997
                                     --------------------------------   --------------------------------   ---------------------
                                         NET                  FIXED         NET                  FIXED         NET
                                       REVENUES      EBIT     ASSETS      REVENUES      EBIT     ASSETS      REVENUES      EBIT
                                     ------------   ------   --------   ------------   ------   --------   ------------   ------
<S>                                  <C>            <C>      <C>        <C>            <C>      <C>        <C>            <C>
United States......................    $1,867.9     $334.5   $1,056.5     $1,700.3     $259.5   $  937.5     $1,036.9     $164.6
Canada.............................       786.5      147.1      561.8        747.9      147.5      463.3        769.5      136.3
                                       --------     ------   --------     --------     ------   --------     --------     ------
       Total.......................    $2,654.4     $481.6   $1,618.3     $2,448.2     $407.0   $1,400.8     $1,806.4     $300.9
                                       ========     ======   ========     ========     ======   ========     ========     ======

<CAPTION>
                                       1997
                                     --------
                                      FIXED
                                      ASSETS
                                     --------
<S>                                  <C>
United States......................  $  884.9
Canada.............................     411.1
                                     --------
       Total.......................  $1,296.0
                                     ========
</TABLE>

Net revenues exclude intersegment revenues.

SUPPLEMENTAL CASH FLOW INFORMATION

     Non-cash investing and financing activities included the issuance of
694,000, 112,000 and 296,000 common equity shares on the reinvestment of
dividends totaling $19.5 million, $3.7 million and $7.0 million in 1999, 1998
and 1997, respectively. The cash paid for acquisitions does not reflect the
business combination with Redland since it was accounted for similar to a
pooling of interests.

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

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31
                                                         -----------------------------
                                                           1999       1998      1997
                                                         --------   --------   -------
<S>                                                      <C>        <C>        <C>
Interest...............................................  $ 51,202   $ 40,435   $20,415
Income taxes (net of refunds)..........................  $131,946   $152,945   $93,045
                                                         ========   ========   =======
</TABLE>

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.

                                       68
<PAGE>   71
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     For 1999 and 1998, the assumed settlement interest rates for pension plans
and other postretirement benefits were 7.75 and 6.75 percent, respectively, for
the company's U.S. plans and 7.35 and 6.25 percent, respectively, for the
Canadian plans. For 1999 and 1998, the assumed rates of increase in future
compensation levels used in determining the actuarial present values of the
projected benefit obligations were 4.5 and 4.0 percent, respectively, for the
company's U.S. plans and 3.5 and 3.5 percent, respectively, for the Canadian
plans. The benefit multiplier increase rate was 2.0 percent for the company's
U.S. hourly plans and 4.5 percent for the Canadian hourly plans. The expected
long-term rate of investment return on pension assets, which includes listed
stocks, fixed income securities and real estate, for each country 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 thousand. 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. For
plans in both the U.S. and Canada, the pre-65 assumed rate was 8.2 percent,
decreasing to 5.5 percent over seven years. For post-65 retirees in the U.S.,
the assumed rate was 6.9 percent, decreasing to 5.5 percent over seven years
with a Medicare assumed rate for the same group of 6.5 percent, decreasing to
5.5 percent over seven years. For post-65 retirees in Canada, the assumed rate
was 8.0 percent, decreasing to 5.5 percent over seven years.

                                       69
<PAGE>   72
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     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, 1999 and 1998 (in
millions).

<TABLE>
<CAPTION>
                                                 PENSION BENEFITS            OTHER BENEFITS
                                             ------------------------   ------------------------
                                              1999     1998     1997     1999      1998     1997
                                             ------   ------   ------   -------   -------   ----
<S>                                          <C>      <C>      <C>      <C>       <C>       <C>
AMOUNTS RECOGNIZED IN THE STATEMENT OF
  FINANCIAL POSITION CONSIST OF:
  Prepaid pension asset....................  $101.9   $ 93.5            $    --   $    --
  Accrued pension liability................   (29.5)   (24.6)            (153.4)   (149.8)
                                             ------   ------            -------   -------
  NET AMOUNT RECOGNIZED AT DECEMBER 31.....  $ 72.4   $ 68.9            $(153.4)  $(149.8)
                                             ======   ======            =======   =======
COMPONENTS OF NET PERIODIC PENSION COST
  Service cost.............................  $ 20.1   $ 15.7   $ 10.7   $   2.7   $   2.1   $1.6
  Interest cost............................    35.5     34.1     28.9      10.3       9.5    8.0
  Expected return on plan assets...........   (50.3)   (45.4)   (37.5)       --        --     --
  Amortization of prior service cost.......     2.7      1.3      1.4      (1.0)     (0.6)  (0.6)
  Amortization of transition asset.........    (1.5)    (1.4)    (1.2)       --        --     --
  Amortization of actuarial (gain) loss....     4.4      4.0      3.4       0.3       0.1   (0.2)
  Curtailment gain.........................    (0.4)      --       --        --        --     --
  Settlement (gain) loss...................     2.4     (0.1)      --        --        --     --
                                             ------   ------   ------   -------   -------   ----
Net periodic pension cost..................    12.9      8.2      5.7      12.3      11.1    8.8
Defined Contribution Plan Cost.............     4.5      4.2      3.8        --        --     --
                                             ------   ------   ------   -------   -------   ----
NET RETIREMENT COST........................  $ 17.4   $ 12.4   $  9.5   $  12.3   $  11.1   $8.8
                                             ======   ======   ======   =======   =======   ====
</TABLE>

                                       70
<PAGE>   73
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

<TABLE>
<CAPTION>
                                                           PENSION BENEFITS          OTHER BENEFITS
                                                          ------------------      --------------------
                                                           1999        1998        1999         1998
                                                          ------      ------      -------      -------
<S>                                                       <C>         <C>         <C>          <C>
CHANGE IN BENEFIT OBLIGATION
  Projected benefit obligation at January 1.........      $529.4      $514.3      $ 150.9      $ 141.7
     Exchange rate changes..........................         9.2       (18.0)         1.2         (1.5)
     Service cost...................................        20.1        15.7          2.7          2.1
     Interest cost..................................        35.5        34.1         10.3          9.5
     Employee contributions.........................         1.9         1.5           --           --
     Plan amendments................................         2.8         2.1         (2.3)          --
     Curtailment....................................        (0.4)       (0.1)          --           --
     Settlement.....................................         2.4        (0.6)          --           --
     Benefits paid..................................       (36.2)      (34.9)        (7.8)        (7.7)
     Actuarial (gain) loss..........................       (44.7)       15.3        (19.6)         6.8
                                                          ------      ------      -------      -------
PROJECTED BENEFIT OBLIGATION AT DECEMBER 31.........       520.0       529.4        135.4        150.9
                                                          ------      ------      -------      -------
CHANGE IN PLAN ASSETS
  Fair value of plan assets at January 1............       614.8       598.3
     Exchange rate changes..........................        14.4       (15.0)
     Actual return on plan assets...................       103.5        63.9
     Employer contributions.........................         8.7         2.3
     Employee contributions.........................         1.9         1.6
     Benefits paid..................................       (36.2)      (34.9)
     Settlement.....................................          --        (0.6)
     Administrative expenses........................        (1.3)       (0.8)
                                                          ------      ------
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31............       705.8       614.8
                                                          ------      ------
RECONCILIATION OF PREPAID (ACCRUED) BENEFIT >COST
     Funded status..................................       185.8        85.4       (135.4)      (150.9)
     Exchange rate changes..........................          --          --           --         (0.2)
     Unrecognized actuarial (gain) loss.............      (122.7)      (23.8)       (16.2)         3.7
     Unrecognized transition asset..................        (2.0)       (3.4)          --           --
     Unrecognized prior service cost................        11.3        10.7         (1.8)        (2.4)
                                                          ------      ------      -------      -------
PREPAID (ACCRUED) BENEFIT COST AT DECEMBER 31.......      $ 72.4      $ 68.9      $(153.4)     $(149.8)
                                                          ======      ======      =======      =======
</TABLE>

     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 $36.5 million, $33.1 million and $1.6 million,
respectively, as of December 31, 1999 and $43.1 million, $39.0 million and $8.2
million, respectively, as of December 31, 1998.

     During the fourth quarter of 1999, the company divested the paving and
asphalt division of Redland Genstar, Inc. through a series of sales. This
triggered a $2.4 million one-time charge for contractual termination benefits
provided to a select group of divested employees. The termination benefits
provided were an immediate unreduced early retirement pension and a monthly
Social Security Bridge payment.

                                       71
<PAGE>   74
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     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, $4.5 million and $4.0 million for 1999, 1998 and 1997, respectively.
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 relate 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.

     The net retirement costs were $17.4 million, $12.4 million and $9.5 million
for each of the years ended December 31, 1999, 1998 and 1997, respectively, for
the company's pension plans and $12.3 million, $11.1 million and $8.8 million
for 1999, 1998 and 1997, respectively, for the company's other postretirement
benefit plans.

     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):

<TABLE>
<CAPTION>
                                                                    ONE-PERCENTAGE-POINT
                                                                   -----------------------
                                                                   INCREASE       DECREASE
                                                                   --------       --------
<S>                                                                <C>            <C>
Increase (decrease) in postretirement benefit obligation at
  December 31, 1999.........................................        $10.8          $(10.0)
Increase (decrease) in the total of service and interest
  cost components for 1999..................................        $ 1.2          $ (1.1)
</TABLE>

COMMITMENTS AND CONTINGENCIES

     The company leases certain land, buildings and equipment. Total rental
expenses under operating leases was $16.1 million, $15.7 million and $14.9
million for each of the three years ended December 31, 1999, 1998 and 1997,
respectively. The table below shows the future minimum lease payments (in
millions) due under noncancelable operating leases at December 31, 1999. Such
payments total $112.8 million.

<TABLE>
<CAPTION>
                                                       YEARS ENDING DECEMBER 31
                                          --------------------------------------------------
                                          2000    2001    2002    2003    2004   LATER YEARS
                                          -----   -----   -----   -----   ----   -----------
<S>                                       <C>     <C>     <C>     <C>     <C>    <C>
Operating leases........................  $16.1   $15.7   $14.3   $12.6   $9.7      $44.4
</TABLE>

     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.

     In 1992, the company's Canadian subsidiary, LCI, along with the Bertrand &
Frere Construction Company Limited and others, became a defendant in lawsuits
instituted in the Ontario (Canada) Court (General Division) arising from claims
brought by building owners, the Ontario New Home Warranty Program and other
plaintiffs regarding alleged defective concrete, fly ash and cement used in
defective footings, foundations and floors. The damages claimed total more than
$65 million (Canadian). The amount of LCI's liability, if any, in these lawsuits
is uncertain. LCI has denied liability and is defending the lawsuits vigorously.
LCI has also introduced claims against some of its primary and excess insurers
for defense costs and indemnity, if any. The lawsuits were joined and a hearing
on the issues was completed in December 1998. The matter was taken under
advisement by the presiding judge and a decision is expected in 2000. LCI
believes that it has insurance coverage that will respond to defense expenses
and liability, if any, in the lawsuits.

                                       72
<PAGE>   75
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     Currently, the company is involved in two remediations 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. At one site where the company had been
named a potentially responsible party, the remedial activities are complete,
long-term maintenance and monitoring are under way, and partial contribution has
been obtained from financially viable parties, including the company. The U.S.
Environmental Protection Agency ("EPA") delisted this site from the National
Priority List in 1999. At the other site, which is 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 the company.
The company also has been named a potentially responsible party at this site.
The suit alleges that in 1969 a predecessor company of the company 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 and numerous other large disposers of hazardous
substances are associated with this site. Management believes that neither
matter is material to the financial condition, results of operations or
liquidity of the company.

     The company is involved in one State site cleanup in the State of Michigan.
On December 21, 1999, the company was served with a complaint alleging that some
time between 1952 and 1992 air-scrubber baghouse bags were transported to and
disposed of at the Arthur Fivenson Iron and Metal Company. The company is one of
six defendants in the State action to recover response activity costs which
Michigan incurred in responding to releases and threatened releases of hazardous
substances at this site. The company intends to vigorously defend this action
and believes that resolution of this matter will not have a material impact on
the financial condition of the company.

     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
or liability associated with the legal action is recorded as a liability in the
financial statements. As of December 31, 1999 and 1998, the liabilities recorded
for environmental obligations are not material to the financial statements of
the company. Although the company believes such accruals are adequate, the
company may incur costs in excess of the amounts provided at December 31, 1999.
However, management believes that the possibility of material liability in
excess of the amounts reported in the December 31, 1999 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
company's liability, if any, arising from 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

     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 $7.0 million, $6.1 million and $6.3 million
during 1999, 1998 and 1997, respectively. In addition, the company purchases
various products from Lafarge S.A. which were $68.5 million, $60.6 million and
$52.5 million in 1999, 1998 and 1997, respectively. All transactions with
Lafarge S.A. were conducted on an arms-length basis.

     Lafarge S.A. reinvested a portion of dividends it was entitled to receive
on the company's Common Stock and Exchangeable Shares during 1999 and 1997.
These reinvestments totaled $17.0 million and $3.9 million, respectively.

                                       73
<PAGE>   76
                      LAFARGE CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

QUARTERLY DATA (UNAUDITED)

     The following table summarizes financial data by quarter for 1999 and 1998
(in millions, except per share information):

<TABLE>
<CAPTION>
                                                 FIRST    SECOND   THIRD   FOURTH   TOTAL
                                                 ------   ------   -----   ------   ------
<S>                                              <C>      <C>      <C>     <C>      <C>
1999
Net sales......................................  $  370   $ 720    $ 872   $ 692    $2,654
Gross profit...................................      20     215      287     203       725
Net income (loss)..............................     (29)     88      139      77       275
Net income (loss) per common equity share (a)
  Basic........................................   (0.40)   1.22     1.91    1.05      3.79
  Diluted......................................   (0.40)   1.22     1.90    1.05      3.77
                                                 ======   =====    =====   =====    ======
1998
Net sales......................................  $  335   $ 675    $ 810   $ 628    $2,448
Gross profit...................................       1     201      267     180       649
Net income (loss)..............................     (39)     85      124      66       236
Net income (loss) per common equity share (a)
  Basic........................................   (0.55)   1.18     1.71    0.92      3.27
  Diluted......................................   (0.55)   1.17     1.70    0.91      3.24
                                                 ======   =====    =====   =====    ======
</TABLE>

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

                                       74
<PAGE>   77

                                                                     SCHEDULE II

                      LAFARGE CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                       ADDITIONS         DEDUCTIONS
                                                       ---------   -----------------------
                                                                   FROM RESERVE
                                                                   FOR PURPOSES
                                         BALANCE AT    CHARGE TO    FOR WHICH
                                        BEGINNING OF   COST AND    RESERVE WAS     OTHER     BALANCE AT END
             DESCRIPTIONS                   YEAR       EXPENSES      CREATED        (1)         OF YEAR
             ------------               ------------   ---------   ------------   --------   --------------
<S>                                     <C>            <C>         <C>            <C>        <C>
Reserve applicable to current
  receivable For doubtful accounts:
     1999.............................    $24,619       $ 2,490      $ (2,858)    $   381       $24,632
     1998.............................    $24,899       $ 3,395      $ (3,328)    $  (347)      $24,619
     1997.............................    $18,793       $ 2,365      $ (3,177)    $ 6,918(2)    $24,899
  For cash and other discounts:
     1999.............................    $ 3,232       $44,211      $(43,735)    $  (668)      $ 3,040
     1998.............................    $ 3,182       $41,107      $(40,025)    $(1,032)      $ 3,232
     1997.............................    $ 3,750       $37,147      $(36,786)    $  (929)      $ 3,182
</TABLE>

---------------
(1) Primarily foreign currency translation adjustments.

(2) Includes $7,299 of allowance for doubtful accounts at December 31, 1997
    related to the acquisition of Redland.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

                                       75
<PAGE>   78

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The section captioned "Item 1 -- Election of Directors" in the company's
Proxy Statement for the 2000 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 the company's Proxy
Statement for the 2000 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 the company's Proxy Statement
for the 2000 Annual Meeting of Stockholders sets forth certain information with
respect to the ownership of the company's 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 the
company's Proxy Statement for the 2000 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.

                                       76
<PAGE>   79

                                    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

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Financial Report:
     Report of Independent Public Accountants, Arthur
      Andersen LLP..........................................   47
Consolidated Financial Statements:
     Consolidated Balance Sheets as of December 31, 1999 and
      1998..................................................   48
     Consolidated Statements of Income for the Years Ended
      December 31, 1999, 1998 and 1997......................   49
     Consolidated Statements of Shareholders' Equity for the
      Years Ended December 31, 1999, 1998 and 1997..........   50
     Consolidated Statements of Comprehensive Income for the
      Years Ended December 31, 1999, 1998 and 1997..........   51
     Consolidated Statements of Cash Flows for the Years
      Ended December 31, 1999, 1998 and
       1997.................................................   52
     Notes to Consolidated Financial Statements.............   53
Financial Statement Schedule:
     Schedule II -- Consolidated Valuation and Qualifying
      Accounts for the Years Ended December 31, 1999, 1998
      and 1997..............................................   75
     All other schedules are omitted because they are not
      applicable.
</TABLE>

         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.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
-------                      ----------------------
<C>       <S>
   3.1    Articles of Amendment and Restatement of the company, filed
          May 29, 1992 [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, 1992].
   3.2    Amended By-Laws of the company, amended on February 9, 1999
          (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, 1998).
   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].
</TABLE>

                                       77
<PAGE>   80

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
-------                      ----------------------
<C>       <S>
   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
          Coppe 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 10.7 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 the company's report on Form 10-Q for the quarter
          ended June 30, 1989].
  10.7    Optional Stock Dividend Plan of the company [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,
          1987].
  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 Re port 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]
</TABLE>

                                       78
<PAGE>   81

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
-------                      ----------------------
<C>       <S>
  10.12   Stock Purchase Agreement dated September 17, 1986 between
          the company and Lafarge Coppee, S.A. [incorporated by
          reference to Exhibit B to the company's 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   Form of Revolving Credit Facility Agreements, dated as of
          September 1, 1994, among the company and nine separate
          banking institutions [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, 1994].
  10.19   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].
  10.20   Amendments dated June 1 and August 1, 1996 to Revolving
          Credit Facility Agreements among the company and six
          separate banking institutions filed as Exhibit 10.18
          [incorporated by reference to Exhibit 10.20 to the Annual
          Report on Form 10-K filed by the company for the fiscal year
          ended December 31, 1996].
  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   Consulting Agreement between the company and Robert Murdoch
          dated October 1, 1997 [incorporated by reference to Exhibit
          10.23 to the Annual Report on Form 10-K filed by the company
          for the fiscal year ended December 31, 1997].
  10.24   1998 Stock Option Plan of the company [incorporated by
          reference to Exhibit 4.1 to the Registratio n 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].
</TABLE>

                                       79
<PAGE>   82

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
-------                      ----------------------
<C>       <S>
  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]
 *21      Subsidiaries of the company.
 *23      Consent of Arthur Andersen LLP, independent public
          accountants.
 *27      Financial Data Schedule
</TABLE>

---------------
 * 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.

                                       80
<PAGE>   83

                                   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 CORPORATION

                                          By: /s/ LARRY J. WAISANEN
                                            ------------------------------------
                                                     LARRY J. WAISANEN
                                                EXECUTIVE VICE PRESIDENT AND
                                                  CHIEF FINANCIAL OFFICER

Date:  March 28, 2000

     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:

<TABLE>
<CAPTION>
                 SIGNATURE                                   TITLE                        DATE
                 ---------                                   -----                        ----
<S>                                          <C>                                    <C>
            /s/ JOHN M. PIECUCH              President and Chief Executive Officer   March 28, 2000
-------------------------------------------              and Director
              JOHN M. PIECUCH

           /s/ LARRY J. WAISANEN              Executive Vice President and Chief     March 28, 2000
-------------------------------------------            Financial Officer
             LARRY J. WAISANEN

            /s/ JOSEPH B. SHERK                  Vice President and Controller       March 28, 2000
-------------------------------------------
              JOSEPH J. SHERK

          /s/ BERTRAND P. COLLOMB                    Chairman of the Board           March 28, 2000
-------------------------------------------
            BERTRAND P. COLLOMB

            /s/ THOMAS A. BUELL                            Director                  March 28, 2000
-------------------------------------------
              THOMAS A. BUELL

           /s/ MARSHALL A. COHEN                           Director                  March 28, 2000
-------------------------------------------
             MARSHALL A. COHEN

          /s/ PHILIPPE P. DAUMAN                           Director                  March 28, 2000
-------------------------------------------
            PHILIPPE P. DAUMAN

          /s/ BERNARD L. KASRIEL                           Director                  March 28, 2000
-------------------------------------------
            BERNARD L. KASRIEL

            /s/ JACQUES LEFEVRE                            Director                  March 28, 2000
-------------------------------------------
              JACQUES LEFEVRE
</TABLE>

                                       81
<PAGE>   84

<TABLE>
<CAPTION>
                 SIGNATURE                                   TITLE                        DATE
                 ---------                                   -----                        ----
<S>                                          <C>                                    <C>
            /s/ PAUL W. MACAVOY                            Director                  March 28, 2000
-------------------------------------------
              PAUL W. MACAVOY

          /s/ CLAUDINE B. MALONE                           Director                  March 28, 2000
-------------------------------------------
            CLAUDINE B. MALONE

           /s/ ROBERT W. MURDOCH                           Director                  March 28, 2000
-------------------------------------------
             ROBERT W. MURDOCH

           /s/ BERTIN F. NADEAU                            Director                  March 28, 2000
-------------------------------------------
             BERTIN F. NADEAU

            /s/ JOHN D. REDFERN                            Director                  March 28, 2000
-------------------------------------------
              JOHN D. REDFERN

            /s/ JOE M. RODGERS                             Director                  March 28, 2000
-------------------------------------------
              JOE M. RODGERS

              /s/ MICHEL ROSE                              Director                  March 28, 2000
-------------------------------------------
                MICHEL ROSE

          /s/ RONALD D. SOUTHERN                           Director                  March 28, 2000
-------------------------------------------
            RONALD D. SOUTHERN

           /s/ GERALD H. TAYLOR                            Director                  March 28, 2000
-------------------------------------------
             GERALD H. TAYLOR
</TABLE>

                                       82