<PAGE>   1
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-K
(MARK ONE)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                      
                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934 
FOR THE TRANSITION PERIOD FROM ............... TO ...............
                         
                        COMMISSION FILE NUMBER 0-11936

                              LAFARGE CORPORATION
              (EXACT NAME OF COMPANY AS SPECIFIED IN ITS CHARTER)

  MARYLAND                                                58-1290226
  (State or other jurisdiction of                         (I.R.S. Employer
  incorporation or organization)                          identification No.)
 


  11130 SUNRISE VALLEY DRIVE                               20191
  SUITE 300                                              (ZIP CODE)
  RESTON, VIRGINIA
  (Address of principal  executive
  offices)

        Company's telephone number, including area code: (703) 264-3600
          Securities registered pursuant to Section 12(b) of the Act:

                                                   NAME OF EACH EXCHANGE ON
        TITLE OF EACH CLASS                             WHICH REGISTERED
------------------------------------         ----------------------------------
COMMON STOCK, PAR VALUE $1.00 PER            NEW YORK STOCK EXCHANGE, INC. 
SHARE                                        THE TORONTO STOCK EXCHANGE
                                             MONTREAL EXCHANGE

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

                                Titles of Class
                                ---------------
                                      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. [X]

         State the aggregate market value of the voting stock held by
nonaffiliates of the Company at MARCH 7, 1997: $ 788,961,914 

         Indicate the number of shares of each of the Company's classes of 
common stock, as of the latest practicable date. 

              CLASS                           OUTSTANDING AT MARCH 7, 1997
              -----                           ---------------------------- 
  COMMON STOCK, PAR VALUE $1.00 PER            70,734,719 SHARES (INCLUDING 
            SHARE                              7,300,482 SHARE EXCHANGEABLE 
                                               PREFERENCE SHARES OF LAFARGE
                                                        CANADA INC.)

                      DOCUMENTS INCORPORATED BY REFERENCE

                                               PART OF FORM 10-K INTO WHICH THE
        DOCUMENT                                   DOCUMENT IS INCORPORATED
        --------                                   ------------------------
  Proxy Statement Dated                                    Part III
     MARCH 24, 1997

================================================================================

<PAGE>   2


ITEM 1.  BUSINESS

Lafarge Corporation (the "Company"), a Maryland corporation, is engaged in the
production and sale of cement and ready-mixed concrete, aggregates, asphalt,
concrete blocks and pipes, precast and prestressed concrete components, and
gypsum wallboard in the United States and Canada.  The Company believes that it
is one of the largest producers of cement and construction materials in North
America.  The Company is also engaged in road building and other construction
using many of its own products.  Its wholly-owned subsidiary, Systech
Environmental Corporation ("Systech"), processes fuel quality waste and
alternative raw materials for use in cement kilns.  The Company's Canadian
operations are carried out by Lafarge Canada Inc. ("LCI"), a major operating
subsidiary of the Company.  Lafarge S.A., a French corporation, and certain of
its affiliates own a majority of the Company's outstanding voting securities.
The terms "Company", "LCI" and "Systech", as used in this Annual Report,
include not only Lafarge Corporation, Lafarge Canada Inc. and Systech
Environmental Corporation, respectively, but also their subsidiaries and
predecessors, unless the context indicates otherwise.

The Company manufactures and sells various types of portland cement, which is
widely used in most types of residential, institutional, commercial and
industrial construction.  The Company also manufactures and sells a variety of
specialty cements and cementitious materials.  At December 31, 1996 the Company
operated 14 full-production cement manufacturing plants with a combined rated
annual clinker production capacity of approximately 11.6 million tons and two
cement grinding facilities. The Company sells cement primarily to manufacturers
of ready-mixed concrete and other concrete products and to contractors
throughout Canada and in many areas of the United States.  During 1996 the
Company's cement operations accounted for 52 percent of consolidated net sales,
after the elimination of intracompany sales, and 78 percent of consolidated
income from operations.

Management believes that LCI is the largest producer of concrete-related
building materials in Canada, where approximately 80 percent of the Company's
construction materials facilities were located at December 31, 1996.  The U.S.
construction materials operations are located primarily in Kansas, Louisiana,
Missouri, Ohio, Pennsylvania, Washington, West Virginia and Wisconsin.  The
Company's significant construction materials activities include the manufacture
and sale of ready-mixed concrete, construction aggregates, other concrete
products and asphalt and road construction.  The Company has operations at
approximately 400 locations including ready-mixed concrete plants, crushed
stone and sand and gravel sites, and concrete product and asphalt plants.
During 1996 the Company's construction materials operations accounted for 47
percent of consolidated net sales, after the elimination of intracompany sales,
and  21 percent of consolidated income from operations.

In September 1996 the Company entered the gypsum wallboard business by
acquiring two manufacturing plants located in Buchanan, New York and
Wilmington, Delaware.  The Company manufactures and sells a full line of gypsum
wallboard products including moisture resistant and fire rated wallboard in a
variety of dimensions.  Gypsum wallboard is used in residential and commercial
construction as well as remodeling and repair.  At December 31, 1996 the two
manufacturing plants had a combined rated annual capacity of 700 million square
feet (MSF) of wallboard. The Company sells gypsum wallboard products primarily
to residential and commercial building materials dealers and individual and
regional/national gypsum distributors.  Net sales of wallboard in 1996 totaled
$24.0 million.

At December 31, 1996 Systech operated five facilities at cement plants in the
U.S., including three plants that are owned by the Company.  Systech processed
approximately 49 million gallons of fuel quality waste in





                                      I-1
<PAGE>   3
1996.  Systech's results of operations are included in the results of the
Company's construction materials operations.  In February 1997 the owner of one
cement plant which is now using fuel quality waste supplied by Systech
announced its intention to stop using this waste in late 1997.  The impact of
this change on the Company will not be material.

No single unaffiliated customer accounted for more than 10 percent of the
Company's consolidated sales during 1996, 1995 or 1994.

The executive offices of the Company are located at 11130 Sunrise Valley Drive,
Suite 300, Reston, Virginia 20191, and its telephone number is (703) 264-3600.

                      (a)  GENERAL DEVELOPMENT OF BUSINESS

In 1970 Lafarge Coppee (now Lafarge S.A.) acquired control of Canada Cement
Lafarge Ltd. (now LCI) which was Canada's largest cement producer.  In 1974 LCI
extended its cement manufacturing operations into the United States through a
joint venture which operated three cement plants in the United States.
Following the termination of the joint venture in 1977, the Company (which was
incorporated in Maryland in 1977 under the name Citadel Cement Corporation of
Maryland) operated two of these U.S. cement plants.  In 1981 a subsidiary of
the Company acquired the common stock of General Portland Inc. ("General
Portland"), the second largest cement producer in the U.S.  In 1983 a corporate
reorganization was effected which established the Company as the parent company
of LCI and General Portland (General Portland was merged into the Company in
1988), and the Company's name was changed to Lafarge Corporation.  In 1986 the
Company purchased substantially all the assets of National Gypsum Company's
Huron Cement Division, consisting of one cement plant, 13 cement terminals and
related distribution facilities around the Great Lakes.  Also in 1986 the
Company acquired Systech.  During 1989, 1990 and 1991, the Company
significantly expanded its U.S. construction materials operations through
acquisitions, the largest of which included 32 plant facilities in five states
and substantial mineral reserves acquired from Standard Slag Holding Company
headquartered in Ohio.  The Company acquired Missouri Portland Cement Company,
Davenport Cement Company and certain related companies and assets in 1991.
This acquisition included three cement plants and 15 cement distribution
terminals located in the Mississippi River Basin, more than 30 ready-mixed
concrete and aggregate operations and the assets of a chemical admixtures
business. In September 1996 the Company acquired two gypsum wallboard
manufacturing plants located in Buchanan, New York and Wilmington, Delaware and
created a new division, Lafarge Gypsum.


RESTRUCTURING

In December 1993 the Company announced the restructuring of its North American
business units to be more efficient and cost competitive.  The restructuring
plan entailed the consolidation of 11 regional operating units into six in the
Company's two main product lines.  This consolidation was completed in 1996 and
has reduced management layers, eliminated duplicative administrative functions
and standardized procedures and information systems.  Manufacturing and
distribution facilities were not materially affected by the restructuring.

The Company's North American organization includes three regions for
construction materials:  Western, based in Calgary, Alberta; Eastern, based in
Toronto, Ontario; and U.S., based in Canfield, Ohio.  Similarly, the cement
group is divided into Western, Eastern and U.S. regions, with office locations
in Calgary, Alberta;





                                      I-2
<PAGE>   4
Montreal, Quebec; and Southfield, Michigan, respectively.  A technical services
group is maintained at the Company's research center in Montreal while
corporate headquarters and the Company's newly created Gypsum Division are in
Reston, Virginia.

See page II-7 of Item 7 and pages II-33 and II-34 of Item 8 of this Annual
Report for further discussion regarding the restructuring.


RECENT SIGNIFICANT DIVESTMENTS

In January 1995 the Company sold its 65 percent interest in a Texas aggregate
operation for approximately $12.7 million in cash.

In December 1994 the Company sold 29 Texas ready-mixed concrete plants and five
related sand and gravel plants for approximately $32.6 million in cash.

In September 1994 the Company sold its Balcones cement plant in Texas, three
cement terminals and an equity interest in an aggregate and asphalt company in
Houston, Texas for approximately $95.8 million in cash, excluding working
capital, and the repayment of $7.4 million of debt to the Company.

In February 1993 the Company sold its cement plant in Demopolis, Alabama. The
sale included seven cement distribution terminals and two terminal leases in
the southeastern United States, a cement grinding plant and several barges.
The sales price was approximately $50 million in cash.  Systech continues to
supply the Demopolis plant with fuel quality waste.


               (b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company's operations are closely integrated.  The Company's single business
segment is construction materials which includes the manufacture and sale of
cement and ready-mixed concrete, precast and prestressed concrete components,
concrete block and pipe, aggregates, asphalt, reinforcing steel and gypsum
wallboard.  In addition, the Company is engaged in road building and other
construction utilizing many of its own products.  Its subsidiary, Systech,
processes fuel quality waste and alternative raw materials for use in cement
kilns.  Financial information with respect to the Company's product lines and
geographic segments is set forth under Item 7 - Management's Discussion of
Income on pages II-3 through II-18, Management's Discussion of Cash Flows on
pages II-19 and II-20 and Item 8 - Consolidated Financial Statements and
Supplementary Data on pages II-43 and II-44 of this Annual Report.

The Company's business is affected significantly by seasonal variations in
weather conditions.  Information with respect to quarterly financial results is
set forth in Item 8 page II-50 of this Annual Report.





                                      I-3
<PAGE>   5
                    (c)    NARRATIVE DESCRIPTION OF BUSINESS


CEMENT PRODUCT LINE

The Company manufactures and sells in Canada (through its subsidiary LCI) and
in the United States various types of portland cement, a basic construction
material manufactured principally from limestone and clay or shale.  Portland
cement is the essential binding ingredient in concrete, which is widely used in
most types of residential, institutional, commercial and industrial
construction.  In addition to normal portland cement, the Company manufactures
and sells a variety of specialty cements, such as high early strength, low and
moderate heat of hydration, sulfate resistant, silica fume, masonry and oilwell
cement.

At December 31, 1996 the rated annual clinker production capacity of the
Company's operating cement manufacturing plants was approximately 11.6 million
tons with about 5.2 million tons in Canada and approximately 6.4 million tons
in the United States.  The Canadian Portland Cement Association's "Plant
Information Summary Report" which was prepared as of December 31, 1995 shows
that the Canadian capacity is the largest of the cement companies in Canada and
represented approximately 35 percent of the total active industry clinker
production capacity in that country.  This same report for the U.S. prepared as
of December 31, 1995 shows that the Company's operating cement manufacturing
plants in the United States accounted for an estimated 8 percent of total U.S.
active industry clinker production capacity.





                                      I-4
<PAGE>   6
Cement Plants

The following table indicates the location, types of process and rated annual
clinker production capacity (based on management's estimates) of each of the
Company's operating cement manufacturing plants at December 31, 1996.  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                                                 Canadian Plants
---------------------------------------------------------------      ------------------------------------------------------------
                                                    Clinker                                                          Clinker
  Location                 Process                  Capacity           Location               Process                Capacity
 --------                  -------                  ---------          --------               -------                --------
 <S>                        <C>      <C>        <C>                    <C>                     <C>       <C>      <C>
 Paulding, OH               Wet                      470,000           Brookfield, N.S.          Dry                  517,700

 Fredonia, KS               Wet                      376,200           St. Constant, QUE         Dry                1,049,100
 Whitehall, PA              Dry      ***             676,200           Bath, ONT                 Dry      ***       1,126,900

 Alpena, MI                 Dry                    2,294,500           Woodstock, ONT            Wet                  561,400

 Davenport, IA              Dry      **              930,500           Exshaw, ALTA              Dry      **        1,188,800
 Sugar Creek, MO            Dry                      517,500           Kamloops, B.C.            Dry                  234,000

 Joppa, IL                  Dry      ***           1,173,000           Richmond, B.C.            Wet                  559,600
                                                ---------------                                                   ---------------
 
 Total capacity                                    6,437,900           Total capacity                               5,237,500
                                                ===============                                                   ===============

 Total 1996 clinker production                     5,889,000           Total 1996 clinker production                4,005,000
                                                ===============                                                   ===============
                                                                                                                              

 1996 production as a percentage                                       1996 production as a percentage
     of total capacity                                   91%               of total capacity                              76%
                                                ===============                                                   ===============
</TABLE>


           *       One short ton equals 2,000 pounds.

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

         ***       Preheater plants.

All of the Company's cement plants are fully equipped with raw grinding mills,
kilns, finish grinding mills, environmental protective dust collection systems
and storage facilities.  Each plant has facilities for shipping by rail and by
truck.  The Richmond, Alpena, Bath, Davenport, Sugar Creek and Joppa plants
have facilities for transportation by water.  The Exshaw plant and the Kamloops
limestone and cinerite quarries are located on sites leased on a long-term
basis.  The Company owns all other plant sites.  The Company believes that each
of its producing plants is in satisfactory operating condition.

At December 31, 1996, the Company owned cement grinding plants for the
processing of clinker into cement at Fort Whyte, Manitoba; Edmonton, Alberta;
Saskatoon, Saskatchewan; Montreal East, Quebec; Superior,





                                      I-5
<PAGE>   7
Wisconsin and Port Manatee, Florida.  The Fort Whyte grinding plant was
shutdown in 1994; furthermore, the Edmonton, Montreal East, Saskatoon and
Superior grinding plants have been shutdown for several years as cement
grinding has not been cost effective at these locations.  These plants were
used during 1996 for the storage of cement.  The Company also owns a cement
grinding plant and terminal facilities at Tampa, Florida.  The Port Manatee and
Tampa plants include facilities for receiving clinker and cement, respectively,
by water.  The Company owns clinker producing plants which have been shutdown
in Havelock, New Brunswick and Ft.  Whyte, Manitoba.


The Manufacturing Process

The Company manufactures cement by a closely controlled chemical process which
begins with the crushing and mixing of calcium carbonates, argillaceous
material (clay, shale or kaolin), silicates (sand) and iron-rich materials.
Once mixed, the crushed raw materials undergo a grinding process, which mixes
the various materials more thoroughly and increases fineness in preparation for
the kiln.  This mixing and grinding process may be done by either the wet or
the dry process.  In the wet process, the materials are mixed with water to
form "slurry", which is heated in kilns, forming a hard substance called
"clinker".   In the more fuel-efficient dry process, the addition of water and
the formation of slurry are eliminated, and clinker is formed by heating the
dry raw materials.  In the preheater process, which provides further fuel
efficiencies, the dry raw materials are preheated by air exiting the kiln, and
part of the chemical reaction takes place 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 the kiln and, as a result, increasing clinker
production capacity.  After the addition of gypsum, the clinker is ground into
an extremely fine powder called Portland cement.  In this form, cement is the
binding agent which, when mixed with sand, stone or other aggregates and water,
produces either concrete or mortar.

The raw materials required to manufacture cement are obtained principally from
operations which are owned by the Company or in which it has long-term
quarrying rights.  These sources are located close to the manufacturing plants
except for the Joppa and Richmond quarries which are located approximately 70
and 80 miles, respectively, from the plant site. Quarried materials are
delivered to Joppa and Richmond by barge.  Each cement manufacturing plant is
equipped with rock crushing equipment.  At Richmond, the Company owns the
reserves, but does not currently quarry them.  The Company purchases limestone
for Richmond from a local source.  At Whitehall, Joppa and Kamloops the Company
sub-contracts the quarry operations.

Fuel represents a significant portion of the cost of manufacturing cement.  The
Company has placed special emphasis on becoming, and has become, more efficient
in its sourcing and use of fuel.  Dry process plants generally consume
significantly less fuel per ton of output than do wet process plants.  At
December 31, 1996 approximately 79 percent and 87 percent of the Company's
clinker production capacity in Canada and the United States, respectively, used
the dry process.

As an additional means of reducing energy costs, most plants are now 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 the
Company to take advantage of price variations between fuels.

The use of fuel quality waste supplied by Systech has also resulted in
substantial fuel cost savings to the Company.  At December 31, 1996 the Company
used fuel quality waste materials obtained and processed by Systech as fuel at
three of the Company's United States cement plants.  Fuel quality waste
supplied by Systech





                                      I-6
<PAGE>   8
constituted approximately 8 percent of the fuel used by the Company in all of
its cement operations during 1996.

The Company's 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 pages II-13 through II-18 of Item 7 of this Annual
Report for further discussion regarding the RCRA and BIF regulations.

The following table shows the possible alternative fuel sources of the
Company's cement manufacturing plants in the United States and Canada at
December 31, 1996.

<TABLE>
<CAPTION>
 PLANT LOCATION                                   FUELS
 --------------                                   -----
 <S>                                              <C>
 United States:
     Paulding, Ohio                               Coal, Coke, Oil, Fuel Quality Waste
     Fredonia, Kansas .....................       Coal, Fuel Quality Waste, Natural Gas
     Whitehall, Pennsylvania ..............       Coal, Oil, Coke, Tire Derived Fuel
     Alpena, Michigan......................       Coke, Fuel Quality Waste, Natural Gas                                       
     Davenport, Iowa.......................       Coke, Oil, Natural Gas                                         
     Sugar Creek, Missouri.................       Coal, Coke, Natural Gas, Fuel Quality Waste
     Joppa, Illinois.......................       Coal, Coke, Natural Gas


 Canada:
     Brookfield, Nova Scotia................      Coal, Coke, Oil, Fuel Quality Waste
     St. Constant, Quebec...................      Natural Gas, Oil, Coke, Pitch Fuel
     Bath, Ontario..........................      Natural Gas, Coke, Coal
     Woodstock, Ontario.....................      Natural Gas, Coal, Coke
     Exshaw, Alberta........................      Natural Gas
     Kamloops, British Columbia.............      Natural Gas, Coal, Coke
     Richmond, British Columbia.............      Natural Gas, Coke, Coal Tailings, Tire Derived Fuel, Bio Gas
</TABLE>


Marketing

Cement is sold by the Company primarily to manufacturers of ready-mixed
concrete and other concrete products and to contractors throughout Canada and
in many areas of the United States.  The states in which the Company had the
most significant U.S. sales in 1996 were Florida and Michigan.  Other states in
which the Company had significant sales include Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, Nebraska, New
York, North Dakota, Ohio, Pennsylvania, Tennessee, Wisconsin and Washington.

The provinces in Canada in which the Company had the most significant sales of
cement products were Ontario and British Columbia, which together accounted for
approximately 44 percent of the Company's total Canadian cement shipments in
1996.  Other provinces in which the Company had significant sales include





                                      I-7
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Alberta and Quebec.  Approximately 36 percent of the Company's cement shipments
in Canada were made to affiliates.

The Company sells cement to several thousand unaffiliated customers.  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
immediate requirements.  The amount of backlog orders, as measured by written
contracts, is normally not significant.

At December 31, 1996 sales offices in the United States were located in
Buffalo, New York; Port Manatee, Florida; Fort Wayne, Indiana; Whitehall,
Pennsylvania; Cleveland, Ohio; Lansing, Michigan; Milwaukee, Wisconsin; Seattle
and Spokane, Washington; Kansas City, Missouri; Davenport, Iowa; Valley City,
Bismarck and Grand Forks, North Dakota and Nashville, Tennessee.

At December 31, 1996 sales offices in Canada were located in Moncton, New
Brunswick; Quebec City and Montreal, Quebec; Richmond Hill, Ontario; Winnipeg,
Manitoba; Regina and Saskatoon, Saskatchewan; Edmonton, Alberta; and Kamloops
and Vancouver, British Columbia.

Distribution and storage facilities are maintained at all cement manufacturing
and finishing plants and at approximately 90 other locations including six deep
water ocean terminals.  These facilities are strategically located to extend
the marketing areas of each plant.  Because of freight costs, most cement is
sold within a radius of 250 miles from the producing plant, except for
waterborne shipments which can be economically shipped considerably greater
distances.  Cement is distributed primarily in bulk but also in paper bags.

The Company utilizes trucks, rail cars and waterborne vessels to transport
cement from its plants to distribution points or directly to customers.
Transportation equipment is owned, leased or contracted for as required.  In
addition, some customers in the United States make their own transportation
arrangements and take delivery of cement at the manufacturing plant or
distribution point.

CONSTRUCTION MATERIALS PRODUCT LINE

The Company is engaged in the production and sale of ready-mixed concrete,
aggregates, asphalt, precast and prestressed concrete, concrete block, concrete
pipe and other related products.  The Company is also engaged in highway and
municipal paving and road building.

LCI is the only producer of ready-mixed concrete and construction aggregates in
Canada that has operations extending from coast to coast.  Ready-mixed concrete
plants mix controlled portions of cement, water and aggregates to form concrete
which is sold primarily to building contractors and delivered to construction
sites by mixer trucks.  In addition, management believes that LCI is one of the
largest manufacturers of precast concrete products and concrete pipe in Canada.
These products are sold primarily to contractors engaged in all phases of
construction activity.  The Company owns substantially all of its ready-mixed
concrete, concrete products and aggregates plants and believes that all such
plants are in satisfactory operating condition.

The Company owned or had a majority interest in 334 construction materials
facilities in Canada at December 31, 1996.  Of these, 126 are ready-mixed
concrete plants concentrated in the provinces of Ontario (where approximately
43 percent of the plants are located), Alberta, Quebec and British Columbia.
The Company also owns ready-mixed concrete plants in New Brunswick, Nova
Scotia, Saskatchewan and Manitoba.  The Company owns 133 construction
aggregates facilities in Canada, approximately 41 percent of which are





                                      I-8
<PAGE>   10
located in Ontario.  The other aggregates facilities are located in Alberta,
Saskatchewan, British Columbia, Quebec, Manitoba, New Brunswick and Nova
Scotia.  The Company's 27 Canadian asphalt facilities are also concentrated
primarily in Ontario with the remaining plants in Alberta, Nova Scotia, New
Brunswick and Quebec.  The Company owns a total of 48 precast and prestressed
concrete, concrete block and concrete pipe plants and miscellaneous other
construction materials operations in Ontario (where approximately 40 percent of
the plants are located), Alberta, British Columbia, Manitoba, Quebec, New
Brunswick and Nova Scotia.

In the U.S., the Company owned or had a majority interest in 75 construction
materials facilities at December 31, 1996.  Of these, 40 are ready-mixed
concrete plants located and with similar concentrations in Missouri, Louisiana
and Wisconsin, and to a lesser extent in Kansas. Of the Company's 27 U.S.
construction aggregates facilities, 14 are in Ohio, 4 in Missouri, with the
remainder located in Michigan, Pennsylvania, Washington, West Virginia and
Wisconsin.  The Company owns a total of 8 concrete paving stone, trucking and
miscellaneous other construction materials operations located in Ohio,
Michigan, Missouri and Wisconsin.

In addition, the Company has minority interests in a number of smaller
companies primarily engaged in the production and sale of ready-mixed concrete,
other concrete products and aggregates in Canada and the U.S.

Systech Environmental Corporation processes fuel quality waste and alternative
raw materials for use in cement kilns.  Using a technology called
co-processing, Systech provides high BTU value waste as a fuel substitute for
coal, natural gas and petroleum coke in heating the cement kiln.  Co-processing
preserves natural resources and serves as a safe and efficient method to manage
selected waste.  In addition, co-processing makes the cement plant more
competitive by reducing fuel cost, which represents about 13 percent of cement
manufacturing cost.

GYPSUM WALLBOARD PRODUCT LINE

The Company manufactures and sells a full line of gypsum wallboard products
which includes moisture resistant and fire rated wallboard in a variety of
dimensions in the United States. Gypsum wallboard's primary uses are for fire
protection, sound insulation and aesthetic appeal. The primary drivers of
demand are new residential and commercial construction, and repair and
remodeling.





                                      I-9
<PAGE>   11
Wallboard Plants

At December 31, 1996 the Company owned two gypsum wallboard manufacturing
plants with a combined rated annual production capacity of approximately 700
MSF.  The Buchanan, New York plant has a rated capacity of 330 MSF.  The
Company's Wilmington, Delaware plant has a rated capacity of 370 MSF. Both
plants operate primarily on natural gas with #2 fuel oil as backup. Natural gas
is purchased on the spot market, with transportation negotiated under long-term
contracts. The Wilmington facility is located at the Port of Wilmington. The
site is leased through the year 2000.  Management believes that a new lease
agreement will be negotiated on satisfactory terms.  The Company owns the
Buchanan plant site. The Company believes that each of its manufacturing plants
is in satisfactory operating condition.

The Manufacturing Process

Gypsum is the common term for calcium sulfate dihydrate. The water molecules
are physically locked inside the crystal structure of the gypsum molecule.
Gypsum, the major raw material required to manufacture wallboard, is obtained
from a third party supplier.

Gypsum rock is first fed into a dryer, where surface moisture is removed. Then
it 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 that is being exploited in the manufacturing process.

The stucco is blended with water and other ingredients in a mixer to form a
slurry.  This slurry is then extruded between two continuous sheets of paper at
the forming station. The extended 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.
The boards are packaged face to face and stored in a warehouse for 24 hours to
cool.  Then, they are ready for shipment.


Marketing

The Company's 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 as well as "Do-It-Yourself" home centers.
The Buchanan, New York plant's principal markets include New York and New
Jersey.  The Wilmington, Delaware plant's largest markets are Pennsylvania and
North Carolina followed closely by Maryland and Virginia.  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 each plant site. The amount of
back-log orders, as measured by written contracts, is normally not significant.

The Company utilizes contracted trucks to transport finished gypsum board to
distributors and customers. Additionally, Wilmington is fully equipped to ship
by rail. The Buchanan plant is in close proximity to its key





                                      I-10
<PAGE>   12
markets resulting in over 90 percent of its production being shipped within
100-200 miles of the plant. The Wilmington plant ships over 50 percent of its
production within 200 miles of the plant.

RESEARCH, DEVELOPMENT AND ENGINEERING

The Company is involved in research and development through its own technical
services laboratories and through its participation in the Portland Cement
Association.  In addition, Lafarge S.A., LCI and the Company are parties to
agreements relating to the exchange of technical and management expertise under
which the Company has access to the research and development resources of
Lafarge S.A.  Research is directed toward improvement of existing technology in
the manufacturing of cement, concrete, wallboard and related products as well
as the development of new manufacturing techniques and products.  Systech is
also engaged in research and development in an effort to further develop the
technology to handle additional waste materials.  Research and development
costs, which are charged to expense as incurred, were $6.3 million, $6.6
million and  $5.5 million for 1996, 1995 and 1994, respectively.  This includes
amounts accrued for technical services rendered by Lafarge S.A. to the Company,
under the terms of the agreements discussed above, of $5.3 million during 1996,
$5.5 million during 1995 and $4.3 million during 1994.

CAPITAL EXPENDITURES AND ASSET DISPOSITIONS

The Company's business is relatively capital-intensive.  During the three-year
period ended December 31, 1996 the Company's capital expenditures were
approximately $342 million, principally for the modernization or replacement of
existing equipment.  Of this amount, approximately 60 percent related to cement
operations and 40 percent to construction materials operations.  During the
same period, the Company also invested approximately $118 million in various
acquisitions that expanded its market and product lines.  Of this amount,
approximately 54 percent related to gypsum operations, 28 percent to
construction materials and 18 percent to cement operations.

In September 1996 the Company acquired G-P Gypsum Corporation's (a subsidiary
of Georgia Pacific Corporation) gypsum wallboard manufacturing plants in
Buchanan, New York and Wilmington, Delaware. In January 1996 the Company
acquired the remaining interest in Tews Company, a ready-mixed concrete and
building materials supplier located in the greater Milwaukee area.  In August
1996 the Company formed a joint venture, Innocon, with another major concrete
supplier to carry on its ready-mixed concrete business in the greater Toronto,
Ontario area.  Innocon is a 50/50 joint venture which owns six ready-mixed
concrete facilities that are strategically located in this market.  In May 1995
the Company purchased all of the issued and outstanding capital stock of
National Portland Cement Company which operated a grinding plant in Port
Manatee, Florida.  In April 1995 the Company acquired the Grey Stone cement
terminal in Wilder, Kentucky and effective September 9, 1994, the Company
acquired the Red Rock Cement terminal in St. Paul, Minnesota.  In December 1993
the Company purchased from Koch Industries, Inc. a plant at Spragge, Ontario
for grinding iron blast furnace slag into slag cement.  In April 1993 the
Company entered into a joint venture, Richvale-York Block Inc., with another
block producer to carry on its concrete block business in the Greater
Metropolitan Toronto area.  The Company is the majority shareholder in this
joint venture which owns two modern block plants that are strategically located
in this market.

In May 1996 the Company sold a sand and gravel operation located in Pittsburgh,
Pennsylvania. In August 1996 the Company sold cement terminals in Wilder,
Kentucky and Pittsburgh, Pennsylvania.  In 1995 the Indianapolis, Indiana
terminal facility was closed.  Cement terminal facilities in St. Louis,
Missouri and





                                      I-11
<PAGE>   13
Houston, Texas were closed in February 1993.  During 1994, the Company sold the
St. Louis terminal land and intends to sell the land on which the Houston
terminal was located.

See General Development of Business - "Recent Significant Divestments" for a
discussion on the sale of certain significant nonstrategic assets.  During
1996, 1995 and 1994, the Company disposed of various surplus properties, none
of which were material.


ENVIRONMENTAL MATTERS

The Company's operations, like those of other companies 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.  The major environmental statutes and
regulations affecting the Company's business and the status of certain
environmental enforcement matters involving the Company are discussed in Item 7
of this Annual Report in the "Environmental Matters" section of Management's
Discussion and Analysis beginning on page II-13.


EMPLOYEES

As of December 31, 1996, the Company and its subsidiaries employed 6,800
individuals of which  4,050 were hourly employees.  Approximately 1,028 of
these hourly employees were engaged in the production of portland cement
products, 2,852  were employed in the Company's construction materials and
waste management operations and 170 were employed in the Company's gypsum
wallboard operations. Salaried employees totaled 2,750. These employees
generally perform work in administrative, managerial, marketing, professional
and technical endeavors. Overall, the Company considers its relations with
employees to be satisfactory.

-  U.S. Cement Operations

The majority of the Company's 541 U.S. hourly employees are represented by
labor unions. During 1996 labor agreements were negotiated at the Fredonia,
Kansas cement plant and at distribution terminals located in Waukegan,
Illinois; Duluth, Minnesota; Cleveland and Toledo, Ohio; and Superior,
Wisconsin. The agreement for the Westlake, Louisiana terminal also expired in
1996 but was not renewed. Terms and conditions under the expired agreement are
still in effect.  During 1997 agreements will expire at the Whitehall,
Pennsylvania and Paulding, Ohio cement plants and the Tampa, Florida cement
grinding facility.  The Company expects the agreements to be successfully
concluded without a work stoppage.

-  U. S. Construction Materials Operations

The Company's 1,059 U.S. construction materials employees consist of 796 hourly
employees and 263  salaried employees.  During 1996 the Company acquired
ready-mixed concrete operations in Houma, Louisiana and Milwaukee, Wisconsin
and aggregate facilities in Central Missouri.  The Company also closed or sold
certain aggregate operations in Granite City, Illinois; Cleveland, Ohio;
Pittsburgh, Pennsylvania; and Newell, West Virginia.





                                      I-12
<PAGE>   14
In the U.S., approximately 75 percent of  the hourly workforce is covered by 18
collective bargaining agreements with six major labor unions.  During 1996
eight collective bargaining and benefits agreements were successfully
negotiated with union bargaining groups without a work stoppage. In 1997 nine
labor and benefit agreements will expire and are expected to be successfully
concluded without a work stoppage.

-  Canadian Cement Operations

Substantially all of the 487 Canadian cement hourly employees are covered by
labor agreements. The agreement for the Edmonton distribution terminal expired
in 1996 and was successfully renegotiated for a three year term without a work
stoppage.  Additionally, in 1996 the collective agreement with the Stoney
Creek, Ontario slag plant was renewed for four years.  In 1997 agreements will
expire at the St. Constant, Quebec; Woodstock, Ontario; and Exshaw, Alberta
cement plants as well as distribution terminals at Toronto, Ontario and
Saskatoon, Saskatchewan.  These agreements are expected to be renewed without a
work stoppage.

-  Canadian Construction Materials Operations

Employees in the Canadian construction materials operations totaled 2,793 at
the end of 1996 with 2,021 hourly employees and 772 salaried employees.

In eastern Canada, hourly employees are covered by 67 collective bargaining
agreements with a number of unions.  There are 36 non-union business units in
which negotiations are held directly with employees.  During 1996 thirty one
collective bargaining agreements were successfully renegotiated with union
bargaining agents without a work stoppage.  Thirty collective bargaining
agreements will expire in 1997 throughout eastern Canada and are expected to be
successfully concluded without a work stoppage.

In western Canada, hourly employees are covered by 34 collective bargaining
agreements with several unions.  During 1996 sixteen collective bargaining
agreements were successfully renegotiated with union bargaining agents without
a work stoppage. Four other contracts expired at or near the end of 1996 and
are expected to be successfully concluded early in 1997.  During 1997 eleven
labor agreements will expire and are expected to be successfully concluded
without a work stoppage.

-  Gypsum Wallboard Operations

Substantially all of the 170 gypsum wallboard hourly employees are covered by
labor agreements.  There are four labor agreements with two unions.  Three of
the labor agreements are in the fourth year of a six year contract and the
other agreement is in the second year of a six year contract. The Buchanan and
Wilmington plants have no recent history of labor disputes.





                                      I-13
<PAGE>   15
COMPETITION

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.  Cement, concrete
products, aggregates and construction services and gypsum wallboard are sold in
competitive markets.  These products and services are obtainable from alternate
suppliers.  Vigorous price, service and quality competition is encountered in
each of the Company's primary marketing areas.

The Company's operating cement plants located in Canada represented an
estimated 35 percent of the rated annual active clinker production capacity of
all Canadian cement plants at December 31, 1995.  The Company is the only
cement producer serving all regions of Canada.  The Company's largest
competitor in Canada accounted for approximately 21 percent of rated annual
active clinker production capacity.  The Company's operating cement plants
located in the United States at December 31, 1995 represented an estimated 8
percent of the rated annual active clinker production capacity of all U.S.
cement plants.  The Company's three largest competitors in the United States
accounted for 14, 7 and 6 percent, respectively, of the rated annual active
clinker production capacity.  The preceding statements regarding the Company's
ranking and competitive position in the cement industry are based on the U.S.
and Canadian Portland Cement Industry: "Plant Information Summary Report" which
was prepared as of December 31, 1995.

  (d)    FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
                                    SALES

The information with respect to foreign and domestic operations and export
sales is set forth on pages II-43 and II-44 of Item 8 - Financial Statements
and Supplementary Data of this Annual Report and is incorporated herein by
reference.





                                      I-14
<PAGE>   16
EXECUTIVE OFFICERS OF THE COMPANY

The following tabulation sets forth as of March 27, 1997 the name and age of
each of the executive officers of the Company and indicates all positions and
offices with the Company held by them at said date.

<TABLE>
<CAPTION>
             Name                                          Position                                     Age
----------------------------          ----------------------------------------------------          -----------
 <S>                                     <C>                                                            <C>
 Bertrand P. Collomb                     Chairman of the Board                                          54

 Bernard L. Kasriel                      Vice Chairman of the Board                                     50

 John  M. Piecuch                        President and Chief Executive Officer                          48

 Edward T. Balfe                         Executive Vice President and                                   55
                                         President - Construction Materials Group

 Duncan S. Gage                          Executive Vice President and                                   47
                                         President - U.S. Cement Operations

 Peter H. Cooke                          Executive Vice President and                                   48
                                         President - Canadian Cement Operations

 Michael J. Balchunas                    Senior Vice President and                                      49
                                         President - Western Cement Region

 Alain Bouruet-Aubertot                  Senior Vice President and                                      40
                                         President -  Lafarge Gypsum Division

 Patrick Demars                          Senior Vice President -                                        48
                                         Corporate Technical Services

 Guillaume Roux                          Senior Vice President -                                        37
                                         Planning and Marketing

 Thomas W. Tatum                         Senior Vice President -                                        60
                                         Human Resources

 Larry J. Waisanen                       Senior Vice President and                                      46
                                         Chief Financial Officer

 John C. Porter                          Vice President and Controller                                  58

 David C. Jones                          Vice President - Legal Affairs and                             55
                                         Secretary

 David W. Carroll                        Vice President - Environment and                               50
                                         Government Affairs

 Kevin C. Grant                          Treasurer                                                      41
</TABLE>





                                      I-15
<PAGE>   17
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 1, 1989.  From January 1, 1989 to August 1, 1989 he was Vice
Chairman of the Board and Chief Operating Officer of Lafarge S.A., and from
1987 until January 1, 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 elected 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 1,
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 the Construction Materials Group.
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.  He had served as
President and General Manager of Permanent Lafarge from 1986 - 1990.

Duncan S. Gage was elected to his current position effective March 1, 1996.
From October 1994 to February 1996 he was Senior Vice President and President
of the Company's U.S. Cement Region.  He previously served as Senior Vice
President - Planning and Development from January 1994 to September 1994.  He
served as Senior Vice President and President of the Company's Southern Region
from May 1992 to December 1993.  He also served as President of Parker Lafarge,
a former construction materials affiliate of the Company from 1990 to 1992.

Peter H. Cooke was elected to his current position effective March 1, 1996.  He
previously served as Senior Vice President and President of the Company's
Eastern Cement Region from July 1990 to February 1996.

Michael J. Balchunas was appointed to his current position effective July 1,
1996. 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.

Alain Bouruet-Aubertot was appointed to his current position effective
September 1, 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.





                                      I-16
<PAGE>   18
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.

Guillaume Roux was appointed to his current position effective February 1,
1996.  From May 1994 to January 1996 he served as Deputy General Manager of
Clause Semences, a former subsidiary of Lafarge S.A.  Prior to that, he served
as a Vice President in the Lafarge S.A. Finance Department from November 1992
to May 1994.  He was Chief Financial Officer of Harris Moran Seeds Company, a
former subsidiary of Lafarge S.A., from May 1989 to November 1992.

Thomas W. Tatum was appointed to his current position in April 1987.

Larry J. Waisanen was appointed to his current position effective January 1,
1996.  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.

John C. Porter was appointed to his current position in September 1990.  He
served as Vice President and Controller of the Company's Great Lakes Region
from April 1989 until September 1990.

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 June 1, 1995.
He previously 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 on the date of the
next annual meeting of the Board of Directors, scheduled to be held on May 6,
1997.





                                      I-17
<PAGE>   19
ITEM 2.  PROPERTIES

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

All of the Company's 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 the Company 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 plant, as well as the gypsum quarry which serves this plant, is on
land owned by the Company.  The limestone and cinerite quarries are 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 at the end of the
year 2000.   Management believes that a new lease agreement will be negotiated
on satisfactory terms.

Limestone quarry sites for the cement manufacturing plants in the United States
are owned and are conveniently located near each plant except for the Joppa
plant quarry which is located approximately 70 miles from the plant site.

LCI's quarrying rights for limestone used by cement manufacturing plants in the
Canadian provinces of Quebec, Nova Scotia, Ontario, Alberta and British
Columbia, are held under quarry leases, some of which require annual royalty
payments to the provincial authorities.  Management of the Company estimates
that its 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 the Company or are purchased from
suppliers and are readily available.

Deposits of raw materials for the Company's aggregate producing plants are
located on or near the plant sites.  These deposits, due to their varying
nature, are either owned by the Company or leased upon terms which permit
orderly mining of reserves.





                                      I-18
<PAGE>   20
ITEM 3.          LEGAL PROCEEDINGS

Since 1992 a number of owners of buildings located in eastern Ontario, Canada,
most of whom are residential homeowners, filed actions in the Ontario Court
(General Division) against Bertrand & Frere Construction Company Limited
("Bertrand") and a number of other defendants seeking damages as a result of
allegedly defective footings, foundations and floors made with ready-mixed
concrete supplied by Bertrand. There are presently approximately 168 plaintiffs
whose claims involve 104 foundations, which are embodied in ten lawsuits. In
two of these actions, the plaintiffs have added LCI as a party defendant; in
the others, LCI is either a third or fourth party. The damages claimed total
more than Cdn. $62 million. In the largest of these actions, approximately 119
plaintiffs are complaining about 81 basement foundations, including a 20-unit
condominium, and claiming approximately Cdn. $51.7 million, each plaintiff
seeking Cdn. $200,000 for costs of repairs and loss of capital value of their
respective home or building, Cdn. $200,000 for punitive and exemplary damages
and Cdn. $20,000 for hardship, inconvenience and mental distress, together with
interest and costs. LCI has been served with cross-claims or third or fourth
party claims by Bertrand in the referenced lawsuits. Bertrand is seeking
indemnity for its liability to the owners as a result of the supply by LCI of
allegedly defective fly ash and cement. In 1995 the Ontario New Home Warranty
Program instituted a lawsuit against Bertrand, LCI and certain other defendants
to recover approximately Cdn. $3 million in costs for replacing or repairing
the foundations of 29 houses which were covered under the warranty program. The
amount of LCI's liability, if any, is uncertain. LCI has denied liability and
is defending the lawsuits vigorously. It has introduced third and fourth party
claims against its insurers to have the insurance coverage issues dealt with by
the Court at the same time as the liability case. The Company believes it has
substantial insurance coverage that will respond to defense expenses and
liability, if any, in the lawsuits.  A trial date of September 2, 1997 has been
set.

In late August 1996 the Company, among others, was served with original
petitions from two sets of plaintiffs in two similar lawsuits brought in state
courts in Starr and Duval Counties, Texas. In the first suit approximately 180
plaintiffs sued approximately 170 defendants involved in the production,
transportation and use of cement, concrete, additives, sand, and gravel
alleging that these materials contain toxic substances, that the plaintiffs
were exposed to the toxic substances in their work areas where they breathe the
fumes, inhale the particles and absorb the materials from them which caused
injury to their respiratory and nervous systems and brain damage. The
plaintiffs claim negligence, gross negligence, and products and strict
liability and seek, among other things, both past and future damages, exemplary
damages and cost of the suit in an unspecified amount. In the second suit
approximately 70 plaintiffs sued approximately 225 defendants alleging claims
similar to those contained in the first suit with an added claim that
plaintiffs suffered exposure to defendants' toxic substances in their homes.
While the amount of liability, if any, to the Company is uncertain, the Company
filed general denials to both suits in late October 1996 and is vigorously
defending the lawsuits. Discovery and venue issues are underway and there is
yet no trial setting in either of these cases.

In July 1995 the Canadian Bureau of Competition Policy commenced an
investigation of alleged price fixing and bid-rigging agreements among
suppliers in the ready-mixed concrete industry in the Quebec City area.
Criminal proceedings under the Competition Act were subsequently filed in the
Quebec Superior Court.  LCI conducted an internal investigation which confirmed
that certain employees had engaged in behavior that was in violation of the law
and LCI's Competition Law Compliance Policy. LCI and three other ready-mixed
concrete producers pleaded guilty to a charge of agreeing to share the





                                      I-19
<PAGE>   21
ready-mixed concrete market in the Quebec City area during the year 1993.
Lafarge agreed to pay a fine of approximately Cdn. $1.9 million and committed
to a comprehensive Competition Act compliance program as part of the court's
prohibition order.

The Company is involved in certain other legal actions and claims.  It is the
opinion of management that all such legal matters will be resolved without
material effect on the Company's Consolidated Financial Statements.





                                      I-20
<PAGE>   22
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          None during the fourth quarter ended December 31, 1996.





                                      I-21
<PAGE>   23
                                    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, page II-22 of
this Annual Report and is incorporated herein by reference.

On March 7, 1997, 63,228,330 Common Shares were outstanding and held by 2,923
record holders.  In addition, on March 7, 1997, 7,300,482 exchangeable
preference shares of LCI, which are exchangeable at the option of the holder
into Common Shares on a one-for-one basis and have rights and privileges that
parallel those of the Common Shares, were outstanding and held by 7,001 record
holders.

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





                                      II-1
<PAGE>   24
ITEM 6.  SELECTED CONSOLIDATED  FINANCIAL DATA

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


<TABLE>
<CAPTION>
                                                                          SELECTED CONSOLIDATED FINANCIAL DATA
                                                                        (in millions except as indicated by an *)

                                                                                 Years Ended December 31
                                                       --------------------------------------------------------------------------
                                                             1996          1995          1994         1993            1992
                                                       --------------------------------------------------------------------------
 <S>                                                      <C>             <C>          <C>            <C>           <C>
 Operating Results
 Net sales                                                $   1,649.3     $1,472.2      $1,563.3      $1,494.5         $1,511.2
                                                       ==========================================================================
 Income Before the Following Items:                       $     236.4     $  185.4      $  141.9      $   70.2         $   28.0
 Interest expense, net                                          (14.1)       (15.2)        (28.8)        (42.7)           (49.4)
 Income taxes                                                   (81.4)       (40.6)        (32.5)        (21.6)           (15.7)
                                                       --------------------------------------------------------------------------
 Net Income (Loss) Before Cumulative Effect of                  140.9        129.6          80.6           5.9            (37.1)
   Change in Accounting Principles

 Cumulative effect of change in accounting principles               -            -             -             -            (63.5)
                                                       --------------------------------------------------------------------------
 Net Income (Loss)                                              140.9        129.6          80.6           5.9           (100.6)
 Depreciation, depletion and amortization                       100.5         94.3         103.6         115.0            125.2
 Cumulative effect of change in accounting principles               -            -             -             -             63.5
 Restructuring                                                   (2.3)        (4.8)        (13.6)         21.6                -
 Other items not affecting cash                                 (31.1)      (100.8)        (22.6)         12.4            (11.4)
                                                       --------------------------------------------------------------------------
 Net Cash Provided by Operations                             $  208.0     $  118.3      $  148.0      $  154.9         $   76.7
                                                       ==========================================================================
 Total Assets                                                $1,813.0     $1,713.9      $1,651.4      $1,687.7         $1,767.4
                                                       ==========================================================================

 Financial Condition at Year End
 Working capital                                             $  394.9     $  448.6      $  402.3      $  315.4         $  253.0
 Property, plant and equipment, net                             867.7        797.0         751.9         880.7            982.3
 Other assets                                                   213.0        198.3         192.4         221.8            205.0
                                                       --------------------------------------------------------------------------
 Total Net Assets                                            $1,475.6     $1,443.9      $1,346.6      $1,417.9         $1,440.3
                                                       ==========================================================================

 Long-term debt                                              $  161.9     $  268.6      $  290.7      $  373.2         $  515.2
 Other long-term liabilities                                    203.2        194.3         214.5         253.0            225.2
 Shareholders' equity                                         1,110.5        981.0         841.4         791.7            699.9
                                                       --------------------------------------------------------------------------
 Total Capitalization                                        $1,475.6     $1,443.9      $1,346.6      $1,417.9         $1,440.3
                                                       ==========================================================================

 Common Equity Share Information
 Net income (loss)*                                          $   2.01     $   1.88      $   1.18      $   0.10       $(0.63)(a)
 Dividends*                                                  $   0.40     $  0.375      $   0.30      $   0.30       $     0.30
 Book value at year end*                                     $  15.79     $  14.17      $  12.34      $  11.84       $    11.79
 Average shares and equivalents outstanding                      70.1         69.0          68.3          61.6             58.7
 Shares outstanding at year end                                  70.4         69.2          68.2          66.9             59.4
                                                       ==========================================================================

 Statistical Data
 Capital expenditures                                        $  124.8     $  121.9     $    95.4      $   58.4       $     54.9
 Acquisitions                                                $   83.5     $   29.3     $     4.7      $   15.2       $      4.3
 Net income (loss) as a percentage of net sales*                  8.5%         8.8%          5.2%          0.4%         (2.5)%(a)
 Return on average shareholders' equity*                         13.5%        14.2%          9.9%          0.8%         (4.8)%(a)
 Long-term debt as a percentage of total capitalization*         11.0%        18.6%         21.6%         26.3%            35.8%
 Number of employees at year end*                               6,800        6,600         6,500         7,400            7,700
 Exchange rate at year end (Cdn. to U.S.)*                      0.730        0.733         0.713         0.755            0.787
 Average exchange rate for year (Cdn. to U.S.)*                 0.733        0.729         0.732         0.775            0.828
                                                       ==========================================================================
</TABLE>


(a) Before cumulative effect of change in accounting principles





                                     II-2
<PAGE>   25
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 (Item 8, page II-27) summarize the
Company's operating performance for the past three years.  To facilitate
analysis, sales and operating profit will be discussed by product line and are
summarized in the table on page II-4 (in millions).

The Company's three product lines are:

1.       Cement - the production and distribution of portland and specialty
         cements and cementitious materials.

2.       Construction materials - the production and distribution of
         ready-mixed concrete, construction aggregates, other concrete
         products, road construction and paving and the processing of fuel
         quality waste and alternative raw materials for use in cement kilns.

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





                                     II-3
<PAGE>   26
<TABLE>
<CAPTION>
                                                                   Years Ended December 31
                                                       --------------------------------------------------------------
                                                              1996                   1995                 1994
                                                       --------------------------------------------------------------
 <S>                                                      <C>                   <C>                  <C>
 Net Sales                                 
  Cement                                                   $   970.9             $   901.6             $   876.6
  Construction Materials                                       780.9                 683.2                 799.7
  Gypsum                                                        24.0                     -                     -
 Eliminations                                                 (126.5)               (112.6)               (113.0)
                                                       --------------------------------------------------------------
 Total Net Sales                                           $ 1,649.3              $1,472.2              $1,563.3
                                                       ==============================================================
                                           
                                           
 Gross Profit                                
  Cement                                                    $  283.0              $  243.9             $   207.8 
  Construction Materials                                       109.7                  79.0                 100.8 
  Gypsum                                                         4.7                     -                     - 
                                                       --------------------------------------------------------------
 Total                                                         397.4                 322.9                 308.6 
                                                       --------------------------------------------------------------
 Operational Overhead and                                                                                        
  Other Expenses                                                                                                 
  Cement                                                      (59.9)                 (59.8)                (69.5)
  Construction Materials                                      (48.0)                 (43.2)                (69.3)
  Gypsum                                                       (2.3)                     -                     - 
                                                       --------------------------------------------------------------
 Total                                                       (110.2)                (103.0)               (138.8)
                                                       --------------------------------------------------------------

 Income From Operations                    
  Cement                                                      223.1                  184.1                 138.3 
  Construction Materials                                       61.7                   35.8                  31.5 
  Gypsum                                                        2.4                      -                     - 
                                                       --------------------------------------------------------------
 Total Operating Profit                                       287.2                  219.9                 169.8 
 Corporate and Unallocated Expenses                           (50.8)                 (34.5)                (27.9)
                                                       --------------------------------------------------------------
 Total Income From Operations                             $   236.4              $   185.4           $     141.9 
                                                       ==============================================================
                                                                                                                 
 Identifiable Assets                                                                                             
  Cement                                                  $   751.6              $   756.9           $     692.3 
  Construction Materials                                      641.0                  601.3                 605.0 
  Gypsum                                                       70.7                      -                     - 
  Corporate and Unallocated Assets                            349.7                  355.7                 354.1 
                                                       --------------------------------------------------------------
 Total Assets                                              $1,813.0               $1,713.9            $  1,651.4 
                                                       ==============================================================
</TABLE>





                                     II-4
<PAGE>   27
YEAR ENDED DECEMBER 31, 1996

In the second quarter of 1995, the Company reached an agreement with Revenue
Canada Taxation related to the pricing of certain cement sales between its
operations in Canada and the U.S. for the years 1984 through 1994. The result
was an increase in net sales and pre-tax income in Canada of U.S. $30.1 million
with corresponding adjustments in the U.S. During the third quarter of 1996,
the Company recorded a U.S. $13.7 million adjustment for the year 1995 based
upon the aforementioned agreement with Revenue Canada Taxation. The impact of
these adjustments on consolidated net income was immaterial. Management's
Discussion and Analysis that follows excludes the impact of this agreement
(except for the discussion on income taxes).

NET SALES

The Company's net sales increased 12 percent in 1996 to $1,649.3 million from
$1,472.2 million in 1995. Canadian net sales were $706.4 million, up 7 percent
while U.S. net sales increased 16 percent to $942.9 million. The improvement in
both Canada and the U.S. was primarily due to increased product shipments and
improved prices as well as the effect of acquisitions (in late 1995 and early
1996) in the construction materials operations. The purchase of two gypsum
wallboard plants in September 1996 also increased U.S. net sales.

The Company's net sales from cement operations were $970.9, an increase of 8
percent due to higher shipments and prices. Cement volumes climbed 3.5 percent
to 12.6 million tons, while net realization (delivered price per ton to
customer less freight) increased 4 percent from 1995 reflecting increases in
all three geographic regions served by the Company. Canadian net sales
increased 8 percent mainly due to a 3 percent improvement in average selling
prices (excluding exchange rate fluctuation) coupled with a 5 percent rise in
shipments. In eastern Canada, cement sales volumes rose 2 percent due to higher
sales in the Atlantic provinces resulting from shipments to the Confederation
Bridge project. In Ontario, shipments were flat; however, in the last six
months of 1996 volumes rose 16 percent as compared with the prior year. Quebec
showed a slight improvement in shipments of 1 percent. Net realization
increased 4 percent due to a 6 percent and a 7 percent improvement in Ontario
and Quebec, respectively, partially offset by a 2 percent decline in the
Atlantic provinces due primarily to product and customer mix. Cement shipments
in western Canada were up 9 percent as all major markets posted increases, led
by Alberta (up 13 percent). Construction activity in the Prairie provinces was
positively impacted by a bumper grain harvest, healthy oil drilling activity
and demand from the mining sector. In British Columbia, sales volumes increased
7 percent as the economy showed steady improvement during 1996.  In addition,
the region benefitted from a work stoppage at a competitor's concrete
operation. In the U.S., net sales were 8 percent higher as cement shipments and
net realization increased 3 percent and 4 percent, respectively. Shipments
increased despite weak activity in the Northeast, the divestment of two cement
terminals on the Ohio River and a brief labor disruption on vessels that
distribute the Company's products on the Great Lakes.

Net sales from the Company's construction materials and waste management
operations were $780.9 million, up 14 percent from 1995.  The improvement was
achieved by higher ready-mixed concrete and aggregate shipments and an increase
in ready-mixed concrete prices in the U.S. From continuing operations,
ready-mixed concrete volumes increased 16 percent to 6.9 million cubic yards
and aggregate volumes climbed 4 percent to 40.1 million tons. In Canada,
ready-mixed concrete volumes increased 19 percent reflecting improved economic
activity, particularly in Ontario, coupled with the impact of 





                                      II-5
<PAGE>   28
acquisitions in western Canada. Shipments to the Confederation Bridge
project in the Atlantic provinces were also higher.  Aggregate volumes
increased 7 percent mainly on strong shipments in Ontario and throughout
western Canada, offset by an 18 percent decline in Quebec. Net sales in Canada
were 7 percent higher, primarily reflecting higher volumes. Net sales in the
U.S. increased 34 percent, mostly due to acquisitions and higher ready-mixed
concrete prices. Ready-mixed concrete shipments from continuing operations
increased 10 percent as higher shipments in the New Orleans market because of
acquisitions were partially offset by a decline in St. Louis due to the
restructuring of operations to strengthen the competitive position in the
market. From continuing operations, aggregate shipments declined 2 percent
mostly due to the divestment, in early 1996, of a sand and gravel operation in
Pittsburgh, Pennsylvania.

Net sales from the Company's gypsum operations that was acquired in September
1996 were $24.0 million. Strong demand for wallboard kept the newly acquired
plants operating at capacity.

GROSS PROFIT AND COST OF GOODS SOLD

The Company's gross profit as a percentage of net sales increased to 24 percent
in 1996 from 22 percent in 1995. Cement gross profit improved 2 percent to 29
percent as volumes and prices both improved. Construction materials gross
profit also increased 2 percent to 14 percent as a result of higher ready-mixed
concrete and aggregate volumes, higher ready-mixed concrete prices in the U.S.
and lower operating costs. The gross profit margin for gypsum wallboard was 20
percent.

The Company's cement cost per ton is heavily influenced by plant capacity
utilization. The following table summarizes the Company's cement production
from continuing operations (in millions of tons) and the clinker production
capacity utilization rate:

<TABLE>
<CAPTION>
                                                                             Years Ended December 31
                                                                   ------------------------------------------
                                                                             1996                 1995
                                                                   ------------------------------------------
 <S>                                                                        <C>                  <C>
 Cement production                                                          11.54                11.01
 Clinker capacity utilization                                                 85%                  90%
                                                                   ==========================================
</TABLE>

Cement production increased 5 percent over 1995. U.S. production totaled 7.1
million tons, a 10 percent increase. Clinker capacity utilization at U.S.
plants was 91 percent in 1996 compared to 90 percent in 1995. In 1995,
manufacturing setbacks at some U.S.  plants necessitated higher purchases of
cement and clinker to replace lost production. Canadian cement production was
4.4 million tons, a 3 percent decrease from 1995. Clinker capacity utilization
in Canada fell to 76 percent in 1996 from 90 percent in 1995 primarily due to
the planned extension of kiln shutdowns at four plants because of high
inventory levels at December 31, 1995.





                                      II-6
<PAGE>   29
SELLING AND ADMINISTRATIVE

Selling and administrative expenses were $151.4 million in 1996 compared with
$141.1 million in 1995. The increase resulted mainly from acquisitions coupled
with higher legal and other professional fees. Selling and administrative
expenses as a percentage of net sales declined to 9.2 percent in 1996 from 9.6
percent in 1995.

OTHER (INCOME) EXPENSE, NET

Other income and expense consists of items such as equity income, amortization
of intangibles and gains and losses from divestitures. Other expense, net was
$9.6 million in 1996 compared with income of $3.5 million in 1995. The change
primarily reflects lower gains from the sale of nonstrategic assets.

RESTRUCTURING

During 1996 and 1995, the Company spent $2.3 million and $4.6 million,
respectively, which was charged to the previously provided restructuring
accrual (see Item 8, pages II-33 and II-34). The restructuring, which resulted
in the separation of approximately 300 employees since inception of the plan,
was completed in 1996. The savings from the restructuring (mostly from the
termination of employees) after reduction for savings related to operations
that have been divested totaled approximately $20 million pre-tax in 1996. This
reduction is in line with management's original expectations.

PERFORMANCE BY LINE OF BUSINESS

The Company's operating profit from cement operations (before corporate and
unallocated expenses) was $223.1 million, $39.0 million higher than 1995.
Results were better primarily due to higher sales volumes and prices, and lower
imports to supplement production at clinker producing plants in the Company's
U.S. markets. Operating profit from Canadian operations was $78.5 million,
$15.0 million better than 1995. The improvement was due to a 5 percent increase
in cement shipments, a 4 percent escalation in net realization (excluding
exchange rate fluctuation) and higher prices for exports to U.S. operations.
Partially offsetting these improvements were planned reductions in clinker
production due to high inventory levels at December 31, 1995 and higher fuel
costs at the Exshaw and Richmond plants in western Canada. The Company's U.S.
operations reported an operating profit of $144.6 million.  This was $24.0
million higher than 1995 due to an increase in shipments, prices and lower
imports to supplement production. This improvement was somewhat offset by
higher prices for imports from Canadian operations.

The Company's operating profit from its construction materials and waste
management operations (before corporate and unallocated expenses) was $61.7
million, or $25.9 million better than 1995. The improvement was achieved by
higher ready-mixed concrete and aggregate sales volumes, an increase in
ready-mixed concrete prices in the U.S., lower operating costs and lower
expenses related to the implementation of a new financial reporting and
management information system. The Company's Canadian operations contributed
$38.1 million, up $16.6 million. Market conditions in the second half of the
year improved. Ready-mixed concrete and aggregate volumes were higher and
operating costs were lower due to specific cost reduction actions implemented
in each region. U.S. operations earned $23.6 million compared with $14.3
million. Earnings improved in all markets, particularly the midwest which





                                      II-7
<PAGE>   30
was hampered in 1995 by flooding. Results were boosted by higher ready-mixed
concrete prices, lower operating costs, acquisition of the remaining interest
in a ready-mixed concrete and building materials supplier, and other late 1995
and 1996 acquisitions.

The Company's recently acquired gypsum wallboard operations reported an
operating profit of $2.4 million. Earnings were greater than expected due to
favorable market conditions.

TOTAL INCOME FROM OPERATIONS

In 1996 total income from operations was $236.4 million, $51.0 million better
than 1995. All of the Company's six cement and construction materials regions
reported better results. The recently acquired gypsum wallboard operations
added to operating earnings. Divestment gains were lower. Operating profit from
Canadian operations was $104.7 million, $29.2 million better. The operating
profit from U.S. operations was $131.7 million, $21.8 million better.

INTEREST EXPENSE

Interest expense decreased by $3.0 million in 1996 mainly due to lower average
debt and capitalized interest on construction in progress. Capitalized interest
was $1.2 million and $2.1 million in 1996 and 1995, respectively.

INTEREST INCOME

Interest income declined $1.8 million in 1996 due to lower interest rates.

INCOME TAXES

The following analysis of income taxes includes the impact of the agreement
with Revenue Canada Taxation related to the pricing of certain cement sales
between the Company's operations in the U.S and Canada. Income tax expense
increased from $40.6 million in 1995 to $81.5 million in 1996. In the U.S.,
taxes were $37.4 million higher due to the earnings improvement, absence of a
non-recurring credit recorded in 1995 and the impact of adjustments relative to
the agreement with Revenue Canada Taxation.  In the third quarter of 1995, the
U.S. tax provision was lowered by $23.0 million due to a reduction of the
valuation allowance which had been recorded in 1992 against the Company's U.S.
deferred tax assets. In Canada, taxes increased $3.5 million due to higher
earnings mostly offset by the impact of adjustments relative to the agreement
with Revenue Canada Taxation. The Company's effective income tax rate was 36.6
percent in 1996 and 23.8 percent in 1995.

NET INCOME

Net income in 1996 of $140.9 exceeded 1995 record earnings of $129.6 million.
Excluding the effect of the nonrecurring tax credit of $23.0 million taken in
the third quarter of 1995, earnings in 1996 were $34.3 million better than
1995. The improvement was mainly due to higher volumes in the Company's major
product lines, higher cement and U.S. ready-mixed concrete prices, lower
operating costs in construction materials operations and lower imports to
supplement production in the U.S. These increases were partially offset by
lower divestment gains, lower clinker production in Canada and higher income
taxes.





                                      II-8
<PAGE>   31
GENERAL OUTLOOK

This message contains forward-looking statements based upon current
expectations that involve a number of business risks and uncertainties. The
factors that could cause results to differ materially include, but are not
limited to, national and regional economic conditions, levels of construction
spending in major markets, supply/demand structure of the industry and
unfavorable weather conditions during peak construction periods.

In Canada, the fiscal austerity measures taken at both the federal and
provincial levels have cut into public works in the short-term. Interest rates
and inflation in Canada are forecasted to remain low, providing the impetus for
increased commercial, industrial and residential investment.

In the Company's cement group, demand in North America in 1997 is expected to
remain close to the historically high level reached in 1996. However, the
Portland Cement Association is forecasting in 1997 a 3 percent decline in
cement consumption for the Company's U.S. markets and a 4.6 percent nationwide
decline in residential construction starts. Nevertheless, modest price
improvements in most markets and improved economic conditions in the
northeastern market of the U.S. are expected. In eastern Canada, the improved
economic activity in Ontario experienced in the second half of 1996 is expected
to continue into 1997. In the Prairie provinces of western Canada the general
outlook remains favorable.

In the construction materials group, the outlook for 1997 is favorable. The
modest economic growth in the Canadian economy and the completion of the
Company's restructuring plan should have a positive impact on operations. In
eastern Canada, modest price and volume gains are anticipated, following the
favorable trend in the fourth quarter of 1996. In the Western Region, volumes
are expected to increase slightly and ready-mixed concrete prices should
improve. The overall economic conditions in the Company's U.S.  markets are
expected to be stable in 1997. New Orleans, Kansas City and Milwaukee are at or
near a market peak; however, construction activity is expected to remain
favorable. The St. Louis market remains very competitive while the outlook for
the northern aggregate operations is positive.

The favorable market factors projected for the wallboard market in North
America should have a positive impact on the Company's gypsum wallboard
operations.





                                      II-9
<PAGE>   32
YEAR ENDED DECEMBER 31, 1995

NET SALES

Net sales declined 6 percent in 1995 to $1,472.2 million from $1,563.3 million
in 1994. However, after adjusting for sales from the Company's 1994 divestments
in the U.S., net sales from continuing operations increased 4 percent. The
divested operations were in Texas and include the Company's Balcones cement
plant and three cement terminals, equity interests in two aggregate operations
and an asphalt company, and ready-mixed concrete plants and related assets. The
increase in net sales was mostly due to a 6 percent improvement in cement
prices partially offset by weak construction activity in Canada and poor
weather in the fourth quarter relative to 1994. Canadian net sales were $660.8
million, a 1 percent decline from 1994. U.S. net sales decreased 9 percent to
$811.4 million due to the 1994 divestments, partially offset by cement price
improvement.

The Company's net sales from cement operations were $901.6 million, an increase
of 3 percent. Excluding sales from the Company's Texas operations divested in
1994, net sales from continuing operations were 8 percent higher although
cement shipments at 12.2 million tons were essentially flat. A decline in
cement shipments in western Canada was offset by shipments from a cement
grinding plant in Florida that was acquired in early 1995.

Canadian net sales increased 3 percent due to a 5 percent increase in average
selling prices (excluding exchange rate fluctuation) and higher shipments of
cementitious products, offset by a 5 percent reduction in shipments reflecting
lower demand in Quebec, British Columbia and Alberta and poor weather in the
fourth quarter of 1995 compared with 1994. In the U.S., net sales were 3
percent higher as average prices increased 6 percent while cement shipments
declined 5 percent. Excluding operations divested, revenues improved 9 percent
while cement shipments were relatively flat. The increase in revenues was
mostly due to higher prices.

Net sales from the Company's construction materials and waste management
operations were $683.2 million, down 15 percent from 1994.  Net sales from
continuing operations were only 1 percent lower than 1994. From continuing
operations, ready mixed concrete volumes slipped 9 percent to 5.4 million cubic
yards and aggregate volumes dropped 2 percent to 37.5 million tons. In Canada,
ready-mixed concrete volumes were 10 percent lower, reflecting sharp declines
in Quebec and British Columbia due to slowdowns in construction activity,
partially offset by higher shipments to the Confederation Bridge project in the
Atlantic provinces. Aggregate volumes were 4 percent lower. Despite lower
volumes, net sales in Canada declined only 1 percent because of price
improvements in most product lines and higher shipments of concrete products.
Net sales from continuing operations in the U.S. declined 1 percent.
Ready-mixed concrete shipments decreased 6 percent mainly due to a construction
slowdown in St. Louis; however, aggregate volumes were 3 percent higher.

GROSS PROFIT AND COST OF GOODS SOLD

The Company's gross profit as a percentage of net sales increased to 22 percent
in 1995 from 20 percent in 1994. Cement gross profit was 27 percent compared
with 24 percent in 1994. The increase was the result of higher prices and lower
production costs in Canada, partially offset by the impact on U.S. margins of
higher cement and clinker purchases. Construction materials gross profit margin
was 12 percent in 1995, down slightly from 13 percent in 1994.





                                     II-10
<PAGE>   33
The Company's cement cost per ton is heavily influenced by plant capacity
utilization. The following table summarizes the Company's cement production
from continuing operations (in millions of tons) and the clinker production
capacity utilization rate:

<TABLE>
<CAPTION>
                                                                              Years Ended December 31
                                                                     ----------------------------------------
                                                                             1995                  1994
                                                                     ----------------------------------------
 <S>                                                                        <C>                   <C>
 Cement production                                                          11.01                 10.94

 Clinker capacity utilization                                                 90%                   86%
                                                                     ========================================
</TABLE>



Cement production increased 1 percent over 1994. Total U.S. cement production
totaled 6.5 million tons, a 2 percent decrease from 1994. Clinker capacity
utilization at U.S. plants was 90 percent in 1995 compared with 94 percent in
1994. Manufacturing setbacks at some U.S. plants necessitated higher purchases
of cement and clinker to replace lost production. In Canada, cement production
was 4.5 million tons, an increase of 5 percent from last year. Canadian clinker
capacity utilization increased to 90 percent from 75 percent in 1994. Two idle
kilns in eastern Canada were restarted for part of the year to supplement
shipments to the U.S. Great Lakes market and to the Confederation Bridge
project in the Atlantic provinces. In addition, record production levels were
achieved in western Canada.

SELLING AND ADMINISTRATIVE

Selling and administrative expenses were $141.1 million in 1995 compared with
$163.4 million in 1994. The reduction resulted from the Company's staff
reductions related to restructuring and from divestments. Selling and
administrative expenses as a percentage of net sales declined to 9.6 percent in
1995 from 10.4 percent in 1994.

OTHER (INCOME) EXPENSE, NET

Other income and expense consists of items such as equity income, amortization
of intangibles and gains and losses from divestitures. Other income, net was
$3.5 million in 1995 compared with a net expense of $3.4 million in 1994. The
change was the result of the absence of various nonrecurring charges and higher
equity income partially offset by lower divestment gains from the sale of
non-strategic assets.

RESTRUCTURING

During 1995 and 1994, the Company spent $ 4.6 million and $14.7 million,
respectively, which was charged to the previously provided restructuring
accrual (see Item 8, pages II-33 and II-34). The Company anticipates that the
remaining accrual of $2.3 million will be spent in the first half of 1996 as
the Construction Materials Group completes its restructuring.

In 1995 and 1994, the annual expense reductions (mostly from the termination of
273 employees through December 31, 1995) that resulted from the restructuring
totaled approximately $14.0 million pre-tax and $10.0 million pre-tax,
respectively, consistent with expectations. In 1994, these expense reductions
were mostly offset by nonrecurring charges for development of the new financial
reporting





                                     II-11
<PAGE>   34
and management information system for construction materials and for secondary
employee relocations that were triggered by the restructuring. The estimated
annual savings upon full implementation of the restructuring plan, after
reduction for savings identified for operations that have been divested, are
$20 million pre-tax. This reduction is substantially consistent with
Management's original expectations.

PERFORMANCE BY LINE OF BUSINESS

The Company's operating profit from cement operations (before corporate and
unallocated expenses) was $184.1 million, $45.8 million better than 1994. The
improvement resulted from higher sales prices in all markets reduced by higher
plant costs and higher clinker and cement purchases in the U.S. The Company's
Canadian operations reported an operating profit of $63.5 million, $20.6
million better than 1994. Higher prices throughout Canada, an increase in
exports to the U.S. and lower plant costs at Exshaw were partially offset by
lower sales volumes in Quebec, British Columbia and Alberta. In the U.S.,
operating profit was $120.6 million, $25.2 million higher than 1994. The
improvement was due to higher prices partially offset by lower shipments, an
increase in costs at some plants and the effect on margins of higher cement and
clinker purchases.

The Company's operating profit from construction materials and waste management
operations (before corporate and unallocated expenses) was $35.8 million, $4.3
million higher than 1994. The improvement was due mostly to the absence of
nonrecurring charges of approximately $7 million at the Company's waste
management operations that were recorded in 1994. The Canadian construction
materials operations earned $21.5 million, $5.1 million better than last year.
Ready-mixed concrete and aggregate margins improved in western Canada. Concrete
product margins in eastern Canada were up due to higher pipe sales. Selling and
administrative expenses were lower due to staff reductions related to
restructuring. The Company's U.S. operations contributed $14.3 million, $.8
million worse than 1994. The lower earnings were mostly a result of the absence
of earnings from divested operations in Texas and lower earnings in the
northern aggregate operations due to higher operating costs.

TOTAL INCOME FROM OPERATIONS

The 1995 total income from operations was $185.4 million, $43.5 million better
than 1994. The improvement was due to higher earnings in the Company's cement
and waste management operations. Negative factors were lower earnings from the
Company's construction materials operations and lower divestment gains.
Operating profit from Canadian operations was $75.5 million, $25.6 million
better than 1994. Operating profit from U.S. operations was $109.9 million,
$17.9 million higher than 1994.

NET INTEREST EXPENSE

Net interest expense decreased by $13.6 million in 1995 due to lower average
debt, higher average cash invested at higher interest rates and capitalized
interest on construction in progress. Capitalized interest was $2.1 million and
$0.7 million in 1995 and 1994, respectively.

INCOME TAXES

The following analysis of income taxes includes the impact of the agreement
with Revenue Canada Taxation related to the pricing of certain cement sales
between the Company's operations in Canada and the U.S. Income tax expense
increased from $32.5 million in 1994 to $40.6 million in 1995. U.S. income





                                     II-12
<PAGE>   35
taxes declined $7.0 million. U.S. earnings were essentially fully taxable in
1995 whereas earnings in 1994 benefited from the utilization of substantially
all of the net operating loss carryforwards. However, in the third quarter of
1995, the U.S. tax provision was lowered by $23.0 million due to a reduction of
a valuation allowance on deferred tax assets which had been recorded in 1992.
The reduction stems from the favorable long-term outlook for the U.S. cement
market, three consecutive years of taxable income in the U.S. and management's
projection of future taxable income in the U.S. which is expected to be in
excess of amounts needed to realize these deferred tax assets. Therefore,
management believes it is more likely than not that the related deferred tax
assets will be realized. In Canada, taxes increased $15.1 million due to higher
earnings. The Canadian effective income tax rates were 37.0 percent in 1995 and
46.9 percent in 1994. Certain elements of the Canadian income tax provision are
fixed in amount and as earnings increase, the effective tax rate is reduced.

NET INCOME

In 1995 the Company reported record net income of $129.6 million compared with
net income of $80.6 million in 1994. The earnings improvement was mainly due to
an increase in cement prices, lower selling and administrative expenses, lower
interest expense in the U.S. and the absence of nonrecurring charges related to
waste management operations. Divestment gains were lower in 1995 and earnings
were negatively impacted by the absence of earnings from divested operations
and higher clinker and cement purchases in the U.S.

ENVIRONMENTAL MATTERS

The Company's 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. The
Company's 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 the Company's facilities, environmental
guidance on key issues confronting the Company, routine training and exchange
of information by environmental professionals, an environmental recognition
award program, and routine and emergency reporting systems.

The Company has been and is presently involved in certain environmental
enforcement matters in both the U.S. and Canada.  Management's practice is to
attempt to actively resolve such matters with the appropriate government
authorities. In certain circumstances, notwithstanding management's belief that
a particular alleged violation poses no significant threat to the environment,
the Company may decide to resolve such matters by entering into a consent
agreement and/or paying a penalty.

The Company currently operates 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, Kansas). The other BIF requirements include a permitting process,
extensive recordkeeping of operational parameters and raw materials and
waste-derived fuels use, demonstration of financial capability to cover future
closures and spill clean-ups, and corrective action requirements for other
solid waste management units at the facilities. The Company's three BIF cement
plants have





                                     II-13
<PAGE>   36
submitted formal Part B permit applications which is the first step in the
permitting process.  The Fredonia plant has completed its test burn, which is
the second step in establishing permit limitations for incorporation into a
draft of the final Part B permit.  The Company anticipates receiving a proposed
Part B permit from the EPA in 1997 that will be subject to public hearing and
comments.  The Paulding plant will be conducting its test burn in 1997 and the
Alpena plant in 1998.

The BIF regulations are extremely complex, and certain provisions have been
subject to varying interpretations. The Company in 1992 received three notices
of violation and complaints from the U.S. Environmental Protection Agency
("EPA") and one from the State of Michigan. All of these enforcement matters
were resolved by entering into settlements and paying penalties. The settlement
with the State of Michigan was in the form of a consent judgment.

In 1996 the Michigan Department of Environmental Quality ("MDEQ") alleged that
the consent judgment with the state had been violated by the Company's Alpena
cement plant. The MDEQ has advised the Company that it is subject to certain
stipulated damages as set forth in the consent judgment which continue to
accrue until the violations are resolved with the MDEQ. The Company believes
that the alleged violations were resolved when the plant submitted the
necessary permit revision. The Company is potentially liable for stipulated
damages in an amount that could exceed $100,000. The Company will be meeting
with representatives of the MDEQ and the Michigan Attorney General's Office in
early 1997 to address the subject of stipulated penalties.

The EPA is in the process of revising its BIF regulations. Revisions of the BIF
regulations and requirements applicable to hazardous waste incinerators were
proposed in May 1996 using both RCRA and Clean Air Act authority. These
requirements rely heavily on maximum achievable control technology ("MACT")
requirements of Title III of the Clean Air Act Amendments of 1990 in
conjunction with the risk based authority of RCRA. The standards that were
proposed are based on technologies from a "pool" of the top 12 environmental
performers of existing facilities that use fuel-quality waste as a supplemental
fuel. The Company's Alpena plant was a "MACT pool" facility; it uses a baghouse
as its primary air pollution control device. The Paulding, Ohio plant recently
installed a baghouse that will likely enable it to meet the final standards
when they are promulgated. The Company has actively participated in the
regulatory process to help formulate revised BIF standards that are reasonable,
cost effective, and comply with the RCRA and Clean Air Act statutory language.
The EPA has indicated that it will reopen the rulemaking procedure in April
1997 and propose further revisions to the regulations. A final regulation is
not anticipated until 1998 with existing BIF facilities having up to three
years to meet the new standards or cease using hazardous wastes as a
supplemental fuel.

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. New MACT standards are to be established that will
require plants to install the best feasible control equipment for certain
hazardous air pollutants thereby significantly reducing air emissions below
existing levels.  The Company is actively participating with other cement
manufacturers in working with the EPA to define test protocols, better define
the scope of 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. It is
expected that the EPA will develop proposed standards for existing and new
facilities and publish them for review and public comment by mid-1997. Final
MACT regulations are anticipated in 1998 and existing facilities will then have
three years to meet the standards or close down operations. The Company's
proposed new Sugar Creek plant will have to meet the new





                                     II-14
<PAGE>   37
MACT standards at the time of start-up. The Company's management believes that
several of its plants are likely to be required to upgrade and/or replace
existing air pollution control and/or emissions monitoring equipment as a
result of MACT regulations.  Management is not able to determine the cost of
such new equipment until the EPA proposes the MACT emission standards.

A by-product of many of the Company's cement manufacturing plants is cement
kiln dust ("CKD"). CKD has been excluded from regulations as a hazardous waste
under the so-called "Bevill Amendment" to RCRA until the EPA completes a study
of CKD, determines if 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 the
management of CKD in karst terrain, fugitive emissions from handling and
management of CKD, and surface water/stormwater runoff from CKD management
areas. The EPA in 1995 outlined a tentative regulatory approach for further
regulation of CKD over a two year period. During this interim period, the
Bevill exclusion would be retained. The EPA indicated that existing legal
authority under the Clean Air and Water Acts would be used to address the
fugitive emissions and stormwater/surface water runoff issues. For those
instances where groundwater concerns exist, the EPA indicated it would use
Subtitle C of RCRA as its jurisdiction for establishing highly tailored CKD
management standards.  Based upon dissatisfaction with the data and rationale
for the EPA's regulatory determination and the tentative regulatory approach,
the Company and other organizations, including public interest and
environmental groups, filed suit in the U.S. Court of Appeals for the District
of Columbia Circuit seeking judicial review of the determination. The court
recently ruled that it lacked jurisdiction to review the matter since the
regulations were not final.

In March 1995 the Company joined other cement manufacturers in submitting to
the EPA a proposed enforceable agreement for the management of CKD. The
agreement was premised on the inherent authority of the U.S. Government to
enter into contracts, and the substantive provisions were based upon the
industry consensus CKD management practices. After a lengthy legal review, the
EPA decided that it lacks the legal authority to enter into an enforceable
agreement. In 1996 the EPA announced that it was recommencing the process of
developing CKD management standards using the industry CKD management standards
as the technical starting point, and Subtitle C of RCRA as the legal authority.
The Company believes it is inappropriate for the EPA to develop CKD standards
under Subtitle C of RCRA. In December 1996 the Company and other cement
manufacturers, through their trade association, formally requested that the EPA
approach implementation of CKD management standards using state solid waste
authority, rather than federal Subtitle C authority. The industry proposed to
the EPA that state programs be based upon guidance on acceptable CKD management
standards published by the EPA. The EPA has advised that it will likely propose
some form of a CKD management standard in late 1997 or early 1998.

Should the EPA ultimately proceed to promulgate highly tailored CKD management
standards, the Company is likely to incur additional capital costs and
operational expenses to meet the new standards. In order to mitigate the longer
term impact of CKD regulation at the federal and/or state levels, the Company
has undertaken a program to assess its management practices for CKD at
operational and inactive facilities in both the U.S. and Canada, and has been
voluntarily taking remedial steps and instituting management practices
consistent with the industry CKD management practices, as well as assessing and
modifying process operations, evaluating and using alternative raw materials,
and implementing new technologies for reducing the generation of CKD.





                                     II-15
<PAGE>   38
In 1993 the State of Michigan alleged that the Company's Alpena cement plant
was managing CKD in violation of applicable state solid waste management
requirements. In 1994 the Company settled this matter by entering into a
consent judgment in federal district court with the State of Michigan. The
agreement included a testing protocol for CKD, CKD Management Practices, a
closure plan for historic CKD areas and payment of a penalty of $350,000 that
essentially covers the costs expended by the state agency to resolve this
matter.

In December 1995 a local citizen group, opposed to cement kilns using
fuel-quality waste as a supplemental fuel, filed a lawsuit in Michigan state
court against the Company and the head of the Michigan Department of Natural
Resources. The suit seeks a judicial determination that CKD management plans
agreed to between the state and the Company in the 1994 consent judgment
referred to above violate the Michigan Environmental Protection Act. The suit
seeks a court order to stop the Company from using fuel quality waste at its
Alpena plant and to prohibit the management of CKD in the related quarry. The
Company believes there is no merit to the lawsuit and is vigorously defending
it.

In another matter relating to the Alpena plant and CKD, in 1994 the State of
Michigan contacted the Company and the former owner of the plant seeking
remediation of an old CKD pile from which it alleges there is runoff of
hazardous substances into Lake Huron. The Company has advised the state that it
is not responsible for remediating this property because the property was
expressly excluded in the asset purchase agreement pursuant to which the
Company acquired the plant. The Company has advised the former plant owner of
the Company's position on this matter. The federal bankruptcy court has ruled
in the Company's favor that this matter was not dismissed in the former plant
owner's bankruptcy proceedings and that the Company therefore can prosecute a
civil claim against the former plant owner to have the deed reformed consistent
with the asset purchase agreement. A civil action has been filed in Texas and
the case is in the discovery phase. The State of Michigan has increased its
administrative activities concerning remediation of this old CKD pile. It is
clear that the state wants to obtain commitments from the former plant owner
and/or the Company to undertake the necessary remediation. The Company has
indicated to the state that it is willing to assist the former plant owner in
conducting the remediation by providing certain materials. The portion of the
old CKD alleged to be the Company's responsibility is de minimis in comparison
to the remaining portion of the CKD pile that is the responsibility of the
former plant owner. Accordingly, the Company's pro rata remediation costs
should not be material, should it fail to prevail in obtaining a deed
reformation in the court action and therefore have to pay part of the
remediation costs.

As with many industrial companies in the U.S. and Canada, the Company has been
and is 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, the Company has voluntarily
initiated clean-up activities at certain of its properties in order to mitigate
long term liability exposure and/or to facilitate the sale of such property. On
a routine basis, the Company reviews all of its active properties, as well as
its idle properties that are no longer productive, in order to determine if
remediation is required, the adequacy of accruals for such remediation, and the
status of all remediations. It has been the Company's experience that over time
sites are added to and removed from the remediation list as clean-up actions
are finalized and, where necessary, governmental sign off is obtained, or when
it is determined that no governmental action will be initiated.





                                     II-16
<PAGE>   39
The Company is currently involved in two federal Superfund remediations. At one
of these sites the remedial activities are complete, long term maintenance and
monitoring is underway, partial contribution has been obtained from financially
viable parties and claims against insurance carriers are being prosecuted. At
the other site, the potentially responsible parties named by the EPA have
initiated a third party action against some 47 other parties including the
Company. The suit alleges that in 1969 a predecessor company of the Company
sold equipment that may have contained hazardous substances which may now be
present at the site. It appears that the largest disposer of hazardous
substances at this site is the U.S. Government (Department of Defense), and
that numerous other large disposers of hazardous substances are associated with
this site. Because this matter relates to events far in the past by a
predecessor entity and because of the large number of parties involved in the
site, it is difficult to evaluate potential liability with respect to this
site. However, the Company believes that its ultimate liability will not be
material.

Title V of the 1990 Clean Air Act Amendments has the potential to result in
significant capital expenditures and operational expenses for the Company. The
Clean Air Act Amendments established a new federal operating permit and fee
program for many manufacturing operations. Under the Act, the Company's U.S.
operations that are deemed to be "major sources" of air pollution must submit
detailed permit applications and pay recurring permit fees. As part of this
process, the Company's plant and regional personnel have been discussing permit
application requirements with the respective state agencies that have the
ultimate responsibility for review and issuance of the federal and/or state
operating permits. The new permitting requirements primarily affect the
Company's cement manufacturing, gypsum wallboard, and waste fuel operations.
The Company has submitted or will be submitting applicable permit applications.

In November 1996 the EPA proposed revisions to two National Ambient Air Quality
Standards under the Clean Air Act - particulate matter and photochemical
oxidants (ozone). Because of the nature of the Company's operations, the
proposed addition of a particulate matter standard to regulate particles 2.5
microns or less in diameter is of potential concern. If issued, the standard
would require states to modify their air quality implementation plans within
one year to demonstrate how they will meet the new standard. It is unclear at
this time what the final standard might be, how it would be implemented by the
states, and the ultimate technology and cost impact on the Company's various
operations.

The Company has announced that it plans to construct two new state-of-the-art
cement plants, one in Sugar Creek, Missouri, and one in Richmond, British
Columbia. Prior to commencement of construction, the Company must obtain all
necessary permits and approvals.  In September 1996 the Company received
approval for the Richmond project with the condition that the Company prepare a
greenhouse gas (CO2) mitigation plan and implement portions of the plan that
are technically and economically feasible. The subject plan was submitted to
the B.C. governmental authorities in December 1996. With respect to the Sugar
Creek project, it is anticipated that all required information will be
submitted to the State of Missouri and a final permit issued in 1997.

A rapidly evolving issue in both the U.S. and Canada is global climate change
or greenhouse gas (CO2) stabilization/reduction. In December 1997 the United
Nations is scheduled to convene an international convention in Kyoto, Japan to
further address the need for international action to assure CO2 stabilization
and/or reduction after the turn of the century. The convention is likely to
address the need for a protocol and/or addendum to the original United Nations
Framework Convention on Climate Change (the so-called Rio Convention). The
potential consequences of CO2 reduction measures for





                                     II-17
<PAGE>   40
cement producers are significant because CO2 is generated from combusting fuels
such as coal and coke to generate the high temperatures necessary to
manufacture cement clinker (which is then ground with gypsum to make cement).
In addition, CO2 is generated in the calcining of limestone to make cement
clinker. Any imposition of raw material or production limitations, fuel use or
carbon taxes could have a significant impact on the cement manufacturing
industry. The Canadian cement industry, including the Company, has entered into
a voluntary industry commitment with the Canadian government providing for a
0.7% annual improvement of energy efficiency per ton of clinker from 1990 to
2000. In the U.S., the Company in 1996 joined the EPA's Climate Wise Program.
This voluntary program is geared to promote energy efficiency in industrial
operations and thereby reduce or stabilize CO2 emissions that result from the
generation of electricity.

Because of differences between requirements in the U.S. and Canada, and the
complexity and uncertainty of existing and future environmental requirements,
permit conditions, costs of new and existing technology potential remedial
costs and insurance coverages, and/or enforcement-related activities and costs,
it is difficult for management to estimate the ultimate level of the Company's
expenditures related to environmental matters. While amounts accrued and
expensed in the past have not been material, the Company's capital expenditures
and operational expenses for environmental matters have increased and are
likely to increase in the future. The Company cannot determine at this time if
capital expenditures and other remedial actions that the Company may in the
future be required to undertake in order to comply with the changing laws
governing environmental protection, will have a material effect upon its
capital expenditures or earnings. However, with respect to current known
environmental contingencies, the Company has accrued for estimated probable
liabilities and does not believe that the ultimate resolution of such matters
will have a material effect on the Consolidated Financial Statements.





                                     II-18
<PAGE>   41
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 operations
that are presented in the Consolidated Statements of Income and liquidity and
financial resources which are 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 has met its operating liquidity needs primarily through
internal generation of cash and expects to continue to do so in the future.
However, because of the seasonality of the Company's business, cash balances
decline in the first two calendar quarters. Short-term borrowings are often
used to fund seasonal operating requirements.

The net cash provided by operations for each of the three years presented
reflects the Company's net income adjusted for noncash items. Depreciation and
depletion declined from 1994 to 1995 due to asset dispositions and the 1994
extension of the estimated useful lives at six of the Company's cement plants.
Depreciation and depletion increased in 1996 due to higher capital spending and
acquisitions. Deferred income taxes affected the operating cash flow primarily
because of the 1994 payment of alternative minimum tax in the U.S., a 1995
decrease in the valuation allowance and the 1996 realization of certain
deferred tax assets. The changes in working capital are discussed in
Management's Discussion of Financial Position.

Cash flows from investing consist primarily of capital expenditures and
acquisitions offset by proceeds from property, plant and equipment
dispositions. Capital investments by product line, including acquisitions, were
as follows (in millions):

<TABLE>
<CAPTION>
                                                                                    Years Ended December 31
                                                                  ------------------------------------------------------------
                                                                           1996                1995                1994
                                                                  ------------------------------------------------------------
 <S>                                                                    <C>                 <C>                 <C>
 Cement                                                                  $  74.2             $  97.1             $  63.7
 Construction Materials                                                     68.3                53.0                32.8
 Gypsum                                                                     63.8                   -                   -
 Other                                                                       2.0                 1.1                 3.7
                                                                  ------------------------------------------------------------
 Total capital investments                                               $ 208.3             $ 151.2             $ 100.2
                                                                  ============================================================
</TABLE>

Capital expenditures are expected to be approximately $270 million in 1997. The
Company intends to invest in projects that maintain or improve the performance
of its plants as well as in acquisition opportunities which will enhance the
Company's competitive position in the U.S. and Canada. In September 1996 the
Company acquired G-P Gypsum Corp.'s (a subsidiary of Georgia Pacific
Corporation) gypsum wallboard manufacturing plants in Buchanan, New York and
Wilmington, Delaware. In October 1995 the Company announced plans to build
cement plants to replace existing facilities in Richmond, British Columbia and
Sugar Creek, Missouri. The Company projects a capital investment of
approximately $105 million for the Richmond plant, which is expected to be
completed in 1999. The Sugar Creek plant and a deep underground limestone
quarry are expected to cost approximately $150 million and to go on line by the
year 2000.





                                     II-19
<PAGE>   42
Capital spending and dividend requirements are anticipated to be funded by
existing cash and cash flows from operations, supplemented by short-term
borrowings as needed. In August 1996 the Company sold two cement terminals on
the Ohio river and in May 1996 the Company sold a sand and gravel operation in
Pittsburgh, Pennsylvania. In 1995 the Company sold its equity interest in a
Texas aggregate operation. In 1994 the Company sold its Balcones, Texas cement
plant, three cement terminals and an equity interest in an aggregate operation.
In December 1994 the Company sold its Texas ready-mixed concrete plants and
related assets. During 1996 and 1995 the Company's proceeds from the sale of
nonstrategic assets, surplus land and other miscellaneous items totaled $29.1
million and $34.6 million, respectively.

The Company has reduced its net debt by $131 million during the three years
ended December 31, 1996. This reduction was the result of improved earnings
from operations, proceeds from the divestment of nonstrategic assets and
moderate levels of capital spending.  In December 1996 the Company redeemed all
of the $100 million outstanding 7% Convertible Debentures dated July 1, 1988.
The redemption price was 101.4% of the principal amount plus accrued interest.
As a result of the redemption, the Company incurred a pre-tax charge of $2.2
million in the fourth quarter ($1.3 million after tax).

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 bilateral revolving credit
facilities with six institutions for total commitments of $150 million. At
December 31, 1996 no amounts were outstanding under these credit facilities.





                                     II-20
<PAGE>   43
MANAGEMENT'S DISCUSSION OF FINANCIAL POSITION

The Consolidated Balance Sheets summarize the Company's financial position at
December 31, 1996 and 1995.

Working capital, excluding cash, short-term investments and current portion of
long-term debt increased $37.0 million from December 31, 1995 to December 31,
1996. Accounts receivable increased $31.4 million primarily due to a 22 percent
increase in net sales in the fourth quarter of 1996 compared with 1995. (Net
Sales are detailed in Management's Discussion of Income). Changes in other
elements of working capital were insignificant.  Net property, plant and
equipment increased $70.7 million during 1996. Depreciation and divestments
were $95.0 million and $25.0 million, respectively. Capital expenditures and
acquisitions of fixed assets totaled $197.3 million. The excess of cost over
net assets of businesses acquired relates primarily to a 1981 U.S. acquisition.
During 1996, the balance increased from the acquisition of two gypsum wallboard
manufacturing facilities.

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

<TABLE>
<CAPTION>
                                                                                           December 31
                                                                            -----------------------------------------
                                                                                    1996                    1995
                                                                            -----------------------------------------
 <S>                                                                              <C>                     <C>
 Long-term debt                                                                    11.0%                   18.6%
 Other long-term liabilities                                                       13.8%                   13.5%
 Shareholders' equity                                                              75.2%                   67.9%
                                                                            -----------------------------------------
 Total capitalization                                                             100.0%                  100.0%
                                                                            =========================================
</TABLE>


The increase in shareholders' equity is discussed in Management's Discussion of
Shareholders' Equity. The decline in long-term debt is discussed in
Management's Discussion of Cash Flows.





                                     II-21
<PAGE>   44
MANAGEMENT'S DISCUSSION OF SHAREHOLDERS' EQUITY

The Consolidated Statements of Shareholders' Equity summarize the activity in
each of the components of shareholders' equity for the three years presented.
In 1996 Shareholders' Equity increased by $129.6 million mainly from net income
of $140.9 million partially offset by dividend payments, net of reinvestments,
of $12.2 million.

Shareholders' equity increased $139.5 million in 1995 due to net income of
$129.6 million and an increase in foreign currency translation adjustments of
$17.0 million (resulting from an increase in the value of the Canadian dollar
relative to the U.S.  dollar), partially offset by dividend payments, net of
reinvestments, of $10.1 million.

Common equity interests include Common Shares and the Lafarge Canada Inc.
Exchangeable Shares, which have comparable voting, dividend and liquidation
rights.  Common Shares are traded on the New York Stock Exchange under the
ticker symbol "LAF" and on the Toronto Stock Exchange and the Montreal
Exchange.  The Exchangeable Shares are traded on the Montreal Exchange and the
Toronto Stock Exchange.

The following table reflects the range of high and low closing prices of Common
Shares by quarter for 1996 and 1995 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>
 1996 Stock Prices

           High                                $19 3/8          $21 3/4           $20 7/8             $20 3/8
           Low                                  18 1/4           18 5/8            18 1/8              18 1/4

 1995 Stock Prices

           High                                $18 3/4          $21 3/8           $21 7/8             $19 5/8
           Low                                  16 3/4           18 3/8            18 3/8              16 3/4
</TABLE>

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


<TABLE>
<CAPTION>
                                                                    Years Ended December 31
                                                ---------------------------------------------------------------
                                                            1996                 1995              1994
                                                ---------------------------------------------------------------
 <S>                                                   <C>                   <C>                 <C>
 Common equity dividends                                  $  28,008            $  25,898         $  20,430

 Less dividend reinvestments                                (15,843)             (15,784)          (10,338)
                                                ---------------------------------------------------------------

 Net cash dividend payments                               $  12,165            $  10,114         $  10,092
                                                ===============================================================

 Common equity dividends per share                        $     .40            $    .375         $     .30
                                                ===============================================================

</TABLE>
                                                                            





                                     II-22
<PAGE>   45
MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA

The Selected Consolidated Financial Data provides both a reference for some
data frequently requested about the Company and a useful record in reviewing
trends.

The Company's net sales decreased 1 percent from 1992 to 1993 due to the drop
in the value of the Canadian dollar and the absence of sales from divested
operations, partially offset by a 4 percent increase in average cement selling
prices and higher cement and construction materials sales volumes. Net sales
increased 5 percent in 1994 due to increases in cement and ready-mixed concrete
shipments and higher cement prices. Net sales were reduced by the declining
value of the Canadian dollar relative to U.S. currency and divestments. Net
sales declined 6 percent in 1995 due to divestments, weak construction activity
in Canada and poor weather in the fourth quarter relative to 1994, partially
offset by higher cement prices. 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 entry into the gypsum wallboard
business. See Management's Discussion of Income for additional details on net
sales.

Inflation has not been a significant factor in the Company's sales or earnings
growth due to low inflation rates in recent years, and because 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 ability to recover increasing costs by
obtaining higher prices for the Company's products varies with the level of
activity in the construction industry and the availability of products to
supply a local market.

In 1992 the Company's cement net realization increased slightly. Net
realization in Canada increased 2 percent but was offset by lower net
realization in the U.S. due to competitive pressures. In 1993 net realization
in the U.S. increased 7 percent but was unchanged in Canada despite lower
volumes and competitive pressures in Ontario. Net realization in 1994 increased
9 percent in the U.S. and 1 percent in Canada. In 1995 net realization
increased 9 percent in the U.S. and 5 percent in Canada. Net realization in
1996 was 4 percent higher in both the U.S. and Canada.

Net cash provided by operations consists of net income (loss), adjusted
primarily for depreciation, restructuring provision and related payments in
1994 and 1993 and, in 1992, the cumulative effect of changes in accounting
principles. The Company is in a capital-intensive industry and as a result
recognizes large amounts of depreciation. The Company has used the cash
provided by operations essentially to expand its markets and to improve the
performance of its plants and other operating equipment.

Capital expenditures and acquisitions totaled $592.5 million over the last five
years. Significant investments during the period included the purchase of two
gypsum wallboard manufacturing facilities, a variety of cement plant projects
to increase production capacity and reduce costs, the installation of receiving
and handling facilities for substitute fuels and raw materials, the building
and purchasing of additional distribution terminals and a transportation vessel
to extend markets and improve existing supply networks, acquisitions of
ready-mixed concrete plants and aggregate operations, and modernization of the
construction materials mobile equipment fleet.





                                     II-23
<PAGE>   46
ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial information is included on the pages indicated:


<TABLE>
<CAPTION>
                                                                             Page
                                                                             ----
 <S>                                                                         <C>
 Report of Independent Public Accountants                                    II - 25
                                                                                    
 Consolidated Balance Sheets                                                 II - 26                      
                                                                                                          
 Consolidated Statements of Income                                           II - 27                      
                                                                                                          
 Consolidated Statements of Shareholders' Equity                             II - 28                      
                                                                                                          
 Consolidated Statements of Cash Flows                                       II - 29                      
                                                                                                          
 Notes to Consolidated Financial Statements                                  II - 30 through II - 50      
                                                                                                          
</TABLE>





                                     II-24
<PAGE>   47
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, 1996
and 1995, and the related consolidated statements of income, cash flows, and
shareholders' equity for each of the three years in the period ended December
31, 1996.  These consolidated financial statements and the schedules referred
to below are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  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 (appearing on pages
II-26 through II-49) present fairly, in all material respects, the financial
position of Lafarge Corporation and subsidiaries as of December 31, 1996 and
1995 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole.  The consolidated Schedule
II (appearing on page IV-7) is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements.  This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated 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
consolidated financial statements taken as a whole.




                                              ARTHUR ANDERSEN LLP
Washington, D.C.
January 22, 1997





                                     II-25
<PAGE>   48
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
                                                                                                   December 31
                                                                                  -----------------------------------------
                                                                                           1996                  1995
                                                                                  -----------------------------------------
 <S>                                                                                  <C>                  <C>
 Assets
 Cash and cash equivalents                                                             $  116,847           $   136,435
 Short-term investments                                                                    92,496                84,516
 Receivables, net                                                                         287,692               256,262
 Inventories                                                                              205,804               210,076
 Other current assets                                                                      29,391                31,214
                                                                                  -----------------------------------------
 Total current assets                                                                     732,230               718,503
 Property, plant and equipment, net                                                       867,723               797,017
 Excess of cost over net assets of businesses acquired, net                                31,657                21,302
 Other assets                                                                             181,369               177,031
                                                                                  -----------------------------------------
 Total Assets                                                                          $1,812,979            $1,713,853
                                                                                  =========================================


 Liabilities and Shareholders' Equity
 Accounts payable and accrued liabilities                                              $  214,393            $  222,458
 Income taxes payable                                                                      28,151                31,729
 Short-term borrowings and current portion of
   long-term debt                                                                          44,821                15,741
 Short-term borrowings from related party                                                  50,000                     -
                                                                                  -----------------------------------------
 Total current liabilities                                                                337,365               269,928
 Long-term debt                                                                           161,934               268,636
 Other long-term liabilities                                                              203,141               194,311
                                                                                  -----------------------------------------
 Total liabilities                                                                        702,440               732,875
                                                                                  -----------------------------------------


 Common Equity Interests
   Common shares ($1.00 par value; authorized 110.1 million            
     shares; issued 62.6 and 60.7 million shares, respectively)                            62,590                60,735
   Exchangeable shares (no par or stated value; authorized 24.3        
     million shares; issued 7.8 and 8.5 million shares, respectively)                      53,817                58,311
 Additional paid-in capital                                                               615,993               593,310
 Retained earnings                                                                        441,481               328,623
 Foreign currency translation adjustments                                                 (63,342)              (60,001)
                                                                                  -----------------------------------------

 Total shareholders' equity                                                             1,110,539               980,978
                                                                                  -----------------------------------------
 Total Liabilities and Shareholders' Equity                                            $1,812,979            $1,713,853
                                                                                  =========================================
</TABLE>


See Notes to Consolidated Financial Statements





                                     II-26
<PAGE>   49
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                              Years Ended December 31
                                                               -----------------------------------------------------------
                                                                      1996                 1995                1994
                                                               -----------------------------------------------------------
<S>                                                              <C>                  <C>                <C>
 Net Sales                                                       $  1,649,280         $  1,472,159        $  1,563,250
                                                               -----------------------------------------------------------

 Costs and expenses                                                                                                   
  Cost of goods sold                                                1,251,886            1,149,168           1,254,646
  Selling and administrative                                          151,442              141,112             163,371
  Interest expense                                                     24,118               27,086              38,132
  Interest income                                                     (10,068)             (11,867)             (9,352)
  Other (income) expense, net                                           9,574               (3,507)              3,366
                                                               -----------------------------------------------------------
 Total costs and expenses                                           1,426,952            1,301,992           1,450,163
                                                               -----------------------------------------------------------
 Pre-tax income                                                       222,328              170,167             113,087
 Income taxes                                                          81,462               40,554              32,451
                                                               -----------------------------------------------------------
 Net Income                                                      $    140,866         $    129,613        $     80,636
                                                               ===========================================================
 Net Income Per Common Equity Share-Primary                      $       2.01         $       1.88        $       1.18
                                                               ===========================================================

 Net Income Per Common Equity Share-Assuming Full Dilution       $       1.95         $       1.82        $       1.18
                                                               ===========================================================

 Dividends Per Common Equity Share                               $       0.40         $      0.375        $       0.30
                                                               ===========================================================
</TABLE>



See Notes to Consolidated Financial Statements





                                     II-27
<PAGE>   50
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
                                                                     Years Ended December 31
                                        ------------------------------------------------------------------------------------
                                                 1996                          1995                          1994
                                        ------------------------------------------------------------------------------------
                                               Amount       Shares      Amount       Shares         Amount        Shares
                                        -----------------------------  -------------------------  --------------------------
 <S>                                    <C>               <C>          <C>           <C>          <C>             <C>
 Common Equity Interests
   Common Shares
    Balance at January 1                 $    60,735         60,735     $ 59,694       59,694       $   55,290      55,290
    Issuance of Common Shares for:                                  
       Dividend reinvestment plans               814            814          812          812              514         514
       Employee stock purchase plan               36             36           36           36               44          44
    Exchange of Exchangeable  Shares             810            810           59           59            3,163       3,163
    Exercise of stock options                    195            195          134          134              683         683
                                        -----------------------------  -------------------------  --------------------------
 Balance at December 31                  $    62,590         62,590     $ 60,735       60,735       $   59,694      59,694
                                        =============================  =========================  ==========================
                                                                    
                                                                    
 Exchangeable Shares                                                
    Balance at January 1                 $    58,311          8,501     $ 57,805        8,494       $   78,443      11,596
    Issuance of Exchangeable                                         
     Shares  for:                                                   
      Dividend reinvestment plans                827             45          722           39              511          26
      Employee stock purchase plan               190             28          182           27              234          35
    Exchange of Exchangeable                                        
       Shares                                 (5,511)          (810)        (398)         (59)         (21,383)     (3,163)
                                        -----------------------------  -------------------------  --------------------------
    Balance at December 31               $    53,817          7,764     $ 58,311        8,501       $   57,805       8,494
                                        =============================  =========================  ==========================

 Additional Paid-In Capital
    Balance at January 1                 $   593,310                    $576,054                    $  535,685
    Issuance of Common and/or
       Exchangeable Shares for:
       Dividend reinvestment plans            14,203                      14,250                         9,313
       Employee stock purchase plan            1,154                       1,001                         1,475
    Exchange of Exchangeable Shares            4,701                         339                        18,220
    Exercise of stock options                  2,625                       1,666                        11,361
                                        -----------------------------  -------------------------  --------------------------
 Balance at December 31                  $   615,993                    $593,310                    $  576,054
                                        =============================  =========================  ==========================


 Retained Earnings
   Balance at January 1                  $   328,623                    $224,908                    $  164,702
   Net income                                140,866                     129,613                        80,636
   Dividends-common equity interests         (28,008)                    (25,898)                      (20,430)
                                        -----------------------------  -------------------------  --------------------------
 Balance at December 31                  $   441,481                    $328,623                    $  224,908
                                        =============================  =========================  ==========================
                                         
 Foreign Currency Translation
   Adjustments                   
   Balance at January 1                  $  (60,001)                    $ (77,007)                  $  (42,455)
   Translation adjustments                   (3,341)                       17,006                      (34,552)
                                        -----------------------------  -------------------------  --------------------------
 Balance at December 31                  $  (63,342)                    $ (60,001)                  $  (77,007)
                                        =============================  =========================  ==========================
 Total Shareholders' Equity              $1,110,539                     $ 980,978                   $  841,454
                                        =============================  =========================  ==========================
                                          
</TABLE>

See Notes to Consolidated Financial Statements





                                     II-28
<PAGE>   51
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
                                                                                          Years Ended December 31
                                                                              -----------------------------------------------
                                                                                     1996           1995          1994
                                                                              -----------------------------------------------
 <S>                                                                              <C>             <C>          <C>
 Cash Flows from Operations
   Net income                                                                       $ 140,866       $129,613    $  80,636
   Adjustments to reconcile net income to net cash provided by
      operations:
      Depreciation, depletion and amortization                                        100,507         94,321      103,586
      Provision for bad debts                                                             255            588        5,941
      Deferred income taxes                                                             8,491        (25,101)     (21,967)
      Gain on sale of assets                                                           (4,085)       (14,585)     (17,797)
      Other noncash charges and credits, net                                             (156)        (2,918)      (1,943)
      Net change in operating working capital (see below)*                            (37,847)       (63,651)        (483)
                                                                              -----------------------------------------------
 Net Cash Provided by Operations                                                      208,031        118,267      147,973
                                                                              -----------------------------------------------
      Cash Flows from Investing
      Capital expenditures                                                           (124,790)      (121,882)     (95,415)
      Acquisitions                                                                    (83,484)       (29,319)      (4,739)
      Purchases of short-term investments, net                                         (7,980)       (34,016)     (50,500)
      Proceeds from property, plant and equipment dispositions                         29,126         34,628      157,945
      Other                                                                              (203)         2,920       11,400
                                                                              -----------------------------------------------
 Net Cash Provided by (Used for) Investing                                           (187,331)      (147,669)      18,691
                                                                              -----------------------------------------------
 Cash Flows from Financing
      Repayment of long-term debt                                                    (109,021)       (24,314)     (78,983)
      Short-term borrowings                                                            77,850              -            -
      Issuance of equity securities, net                                                4,201          3,019       13,797
      Dividends, net of reinvestments                                                 (12,165)       (10,114)     (10,092)
                                                                              -----------------------------------------------
 Net Cash Consumed by Financing                                                       (39,135)       (31,409)     (75,278)
                                                                              -----------------------------------------------
 Effect of exchange rate changes                                                       (1,153)         4,189       (7,623)
                                                                              -----------------------------------------------
 Net Increase (Decrease) in Cash and Cash Equivalents                                 (19,588)       (56,622)      83,763
 Cash and Cash Equivalents at Beginning of Year                                       136,435        193,057      109,294
                                                                              -----------------------------------------------
 Cash and Cash Equivalents at End of Year                                           $ 116,847       $136,435     $193,057
                                                                              ===============================================
 *Analysis of Changes in Working Capital Items
      Receivables, net                                                              $ (20,015)      $  7,550     $(30,540)
      Inventories                                                                      11,249        (31,147)      (4,021)
      Other current assets                                                                (97)          (773)      (5,294)
      Accounts payable and accrued liabilities                                        (23,181)       (26,078)      40,753
      Restructuring                                                                    (2,298)        (4,792)     (13,596)
      Income taxes payable                                                             (3,505)        (8,411)      12,215
                                                                              -----------------------------------------------
 Net Change in Operating Working Capital                                            $ (37,847)      $(63,651)    $   (483)
                                                                              ===============================================
</TABLE>


See Notes to Consolidated Financial Statements





                                     II-29
<PAGE>   52
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Together with its subsidiaries, Lafarge Corporation ("Lafarge"), a Maryland
corporation, is engaged in the production and sale of cement, ready-mixed
concrete, aggregates, other concrete products and gypsum wallboard. Lafarge
operates in the U.S. and its major operating subsidiary, Lafarge Canada Inc.
("LCI"), operates throughout Canada. The primary U.S. markets are in the
mid-western, mid-south, northeastern, north-central and northwestern 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.

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, disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses. Actual results could differ from
those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of Lafarge and all
of its majority-owned subsidiaries (the "Company"), after the elimination of
intercompany transactions and balances. 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 the prior year financial
statements to conform to the 1996 presentation.

Foreign Currency Translation

Assets and liabilities of LCI are translated at the exchange rate prevailing at
the balance sheet date. Revenue and expense accounts for this subsidiary are
translated using the average exchange rate during the period. Foreign currency
translation adjustments are disclosed as a separate item in shareholders'
equity.

Revenue Recognition

Revenue from the sale of cement, concrete products,  aggregates and gypsum
wallboard is recorded at the time the products are shipped. Revenue from waste
recovery and disposal is recorded at the time 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.





                                     II-30
<PAGE>   53
Derivative Financial Instruments

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

The Company is a party to an interest rate swap contract ("Interest Swap")
requiring the Company to make a fixed interest rate payment and to receive a
floating interest rate payment from a commercial bank. This Interest Swap was
transacted in order to hedge a portion of the Company's floating interest rate
borrowings from significant increases in interest rates. The net difference in
interest payments is accrued as interest rates change and is recognized over
the life of the Interest Swap as a component in the "Interest expense" caption
in the Consolidated Statements of Income.

Cash Equivalents

The Company considers liquid investments with an original maturity at the date
of purchase of three months or less to be cash equivalents. Because of the
short maturity of these investments, their carrying amount approximates fair
value.

Short-Term Investments

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

Inventories

Inventories are valued at lower of cost or market. The majority of the
Company's U.S. 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 on which depletion is recorded using the
units-of-production method.

During 1994, the Company completed a review of the estimated useful lives of
its cement plants. As a result, the Company extended the estimated useful lives
of certain plants effective July 1, 1994. The effect of this change in estimate
reduced depreciation expense and increased pre-tax income for the year ended
December 31, 1994 by approximately $2.6 million.

Excess of Cost Over Net Assets of Businesses Acquired

The excess of cost over fair value of net assets of businesses acquired
("goodwill") is amortized using the straight-line method over periods not
exceeding 40 years. The Company continually evaluates





                                     II-31
<PAGE>   54
whether events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. In evaluating impairment, the
Company estimates the sum of the expected future cash flows, undiscounted and
without interest charges, derived from such goodwill over its remaining life.
The Company believes that no impairment exists at December 31, 1996. The
amortization recorded for 1996, 1995 and 1994 was $3.0 million, $2.4 million
and $4.0 million, respectively. Accumulated amortization at December 31, 1996
and 1995 was $40.6 million and $37.6 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 financial
statements, without offset of potential insurance recoveries. Costs which
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. All other environmental costs
are expensed when incurred.

In 1996 Statement of Position ("SOP") 96-1, "Environmental Remediation
Liabilities," was issued. This new standard, which the Company must adopt in
1997, requires that specific parameters be applied for recognition and
measurement of environmental remediation liabilities. The Company believes that
adoption of SOP 96-1 will not have a material impact on its financial position
and operating results.

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 $6.3 million, $6.6
million and $5.5 million for 1996, 1995 and 1994, respectively.

Interest

Interest of $1.2 million, $2.1 million and $0.7 million was capitalized in
1996, 1995 and 1994, respectively.





                                     II-32
<PAGE>   55
Net Income Per Common Equity Share

The calculation of net income per common equity share is based on the weighted
average number of Lafarge's Common Shares and the Exchangeable Preference
Shares of LCI ("Exchangeable Shares") outstanding in each period and the
assumed exercise of stock options.  The weighted average number of shares and
share equivalents outstanding was (in thousands) 70,092, 68,984 and 68,254 in
1996, 1995 and 1994, respectively.

The weighted average number of shares and share equivalents outstanding
assuming full dilution was (in thousands) 74,437 and 73,504 in 1996 and 1995,
respectively, and assumed conversion of the Convertible Subordinated Debentures
(the "Convertible Debentures").  The computation of fully diluted earnings per
share was antidilutive in 1994. The Convertible Debentures were redeemed in
1996 as further explained in the Debt footnote.

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.

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"), by making the required footnote disclosures (see stock option and
purchase plans footnote).  Accordingly, adoption of this new standard has no
impact on the Company's reported financial position or results of operations.

Acquisitions

In September 1996 the Company acquired G-P Gypsum Corp.'s (a subsidiary of
Georgia Pacific Corporation) gypsum wallboard plants in Buchanan, New York and
Wilmington, Delaware.

RESTRUCTURING

In the fourth quarter of 1993, the Company recorded a one-time pre-tax
restructuring charge of $21.6 million ($16.4 million net of tax benefits, or
$.27 per share) to cover the direct costs of restructuring the Company's North
American business units to increase organizational efficiency. The primary
components of the restructuring charge were separation benefits for
approximately 310 employees, after reduction for employees identified for
operations that have been divested, employee relocation costs and early
retirement benefits for eligible employees electing early retirement. The
charge also included office relocation and lease termination.

The restructuring plan entailed the consolidation of eleven regional operating
units into six units in the Company's two main business lines. This
consolidation reduced management layers, eliminated duplicative administrative
functions and standardized procedures and information systems. Manufacturing
and distribution facilities were not materially affected.





                                     II-33
<PAGE>   56
During 1996, 1995 and 1994 respectively, the Company spent $2.3 million, $4.6
million, and $14.7 million (after exchange rate impact) on the restructuring.
The restructuring was completed in 1996. Employees separated total
approximately 300.

RECEIVABLES

Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
                                                                                            December 31
                                                                                ------------------------------------
                                                                                    1996                     1995
                                                                                ------------------------------------
 <S>                                                                              <C>                      <C>
 Trade and note receivables                                                       $305,471                 $271,999
 Retainage on long-term contracts                                                    4,765                    8,490
 Allowances                                                                        (22,544)                 (24,227)
                                                                                ------------------------------------
 Total receivables, net                                                           $287,692                 $256,262
                                                                                ====================================
                                                                                  
</TABLE>

INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                              December 31
                                                                                ------------------------------------
                                                                                    1996                     1995
                                                                                ------------------------------------
 <S>                                                                              <C>                     <C>
 Finished products                                                                $100,900                $  97,950
 Work in process                                                                    13,711                   16,959
 Raw materials and fuel                                                             45,550                   50,030
 Maintenance and operating
   supplies                                                                         45,643                   45,137
                                                                                ------------------------------------
 Total inventories                                                                $205,804                 $210,076
                                                                                ====================================
</TABLE>

Included in the finished products, work in process and raw materials and fuel
categories are inventories valued using the LIFO method of $61.1 million and
$67.5 million at December 31, 1996 and 1995, respectively. If these inventories
were valued using the average cost method, such inventories would have
decreased by $5.0 million and $6.6 million, respectively.

PROPERTY, PLANT AND EQUIPMENT

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


<TABLE>
<CAPTION>
                                                                                          December 31
                                                                        -----------------------------------------
                                                                               1996                     1995
                                                                        -----------------------------------------
 <S>                                                                      <C>                      <C>
 Land and mineral deposits                                                $    166,060              $   164,187
 Buildings, machinery and equipment                                          1,652,942                1,544,215
 Construction in progress                                                       74,254                   72,133
                                                                        -----------------------------------------
 Property, plant and  equipment, at cost                                     1,893,256                1,780,535
 Less accumulated depreciation and depletion                                (1,025,533)                (983,518)
                                                                        -----------------------------------------
 Total property, plant and equipment, net                                 $    867,723              $   797,017
                                                                        =========================================
</TABLE>





                                     II-34
<PAGE>   57

 OTHER ASSETS


 Other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                        December 31
                                                                        ----------------------------------------
                                                                              1996                     1995
                                                                        ----------------------------------------
 <S>                                                                      <C>                      <C>

 Long-term receivables                                                     $    17,082             $    10,985
 Investments in unconsolidated
  companies                                                                     22,646                  36,894
 Prepaid pension asset                                                          88,157                  85,192
 Property held for sale                                                         19,594                  21,221
 Other                                                                          33,890                  22,739
                                                                        ----------------------------------------
 Total other assets                                                        $   181,369             $   177,031
                                                                        ========================================
</TABLE>


Property held for sale represents certain permanently closed cement plants and
land which are carried at the lower of cost or fair value less the estimated
costs to sell the plant or land.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
                                                                                            December 31
                                                                            ----------------------------------------
                                                                                 1996                   1995
                                                                            ----------------------------------------
 <S>                                                                          <C>                   <C>
 Trade accounts payable                                                       $   67,284            $   58,171
 Accrued payroll expense                                                          35,862                32,704
 Accrued interest expense                                                            722                 4,235
 Restructuring                                                                        -                  2,267
 Bank overdrafts                                                                  14,328                25,481
 Other accrued expenses                                                           96,197                99,600
                                                                            ----------------------------------------
 Total accounts payable and accrued liabilities                               $  214,393            $  222,458
                                                                            ========================================
</TABLE>





                                     II-35
<PAGE>   58
DEBT

Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
                                                                                           December 31
                                                                             ------------------------------------
                                                                                  1996                   1995
                                                                             ------------------------------------
<S>                                                                            <C>                   <C>
 Medium-term notes maturing in various amounts
   between 1997 and 2006, bearing interest at fixed rates which
   range from 9.1 percent to 9.8 percent                                       $ 138,000             $ 153,000

 7% Convertible Debentures maturing in 2013,
  convertible into Common Shares at a conversion price of $22.125
  per share, redeemed December 12, 1996 at 101.4 percent of the
  principal amount plus accrued interest                                               -               100,000
                                                                                                               
 Tax-exempt bonds maturing in various amounts between
  1997 and 2026, bearing interest at floating rates which range
  from 3.5 percent to 5.5 percent                                                 39,450                29,983

 Short-term borrowings maturing in various amounts
  through March 1997, bearing interest at an average rate of 5.7
  percent                                                                         27,850                     -

 Short-term borrowings from related party maturing in
  March 1997, bearing interest at an average rate of 5.6 percent                  50,000                     - 

 Other                                                                             1,455                 1,394
                                                                             ------------------------------------

 Subtotal                                                                        256,755               284,377

 Less short-term borrowings and current portion of
  long-term debt                                                                 (94,821)              (15,741)

                                                                             ------------------------------------
 Total long-term debt                                                          $ 161,934             $ 268,636
                                                                             ====================================
</TABLE>





The fair value of debt at December 31, 1996 and 1995, respectively, was
approximately $267.7 and $304.4 million compared with $256.8 and $284.4 million
included in the Consolidated Balance Sheets. This fair value was estimated
based upon quoted market prices or current interest rates offered to the
Company for debt of the same maturity.





                                     II-36
<PAGE>   59
The annual principal payment requirements on debt, excluding short-term
borrowings, for each of the five years in the period ending December 31, 2001
are as follows (in millions):

<TABLE>
<CAPTION>
                                         Repayments
                                      ----------------
 <S>                                       <C>
 1997                                      $  17.0
 1998                                      $  29.7
 1999                                      $  22.6
 2000                                      $  35.3
 2001                                      $  30.4
 Thereafter                                $  43.9
</TABLE>

The Company has similar, bilateral revolving credit facilities with six
institutions for total commitments of $150 million, extending through June 1,
2001. At the end of 1996, no amounts were outstanding under the revolving
credit facilities. 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 LIBOR rate.

The Company's debt agreements require the maintenance of certain financial
ratios relating to fixed charge coverage and leverage. At December 31, 1996,
the Company was in compliance with these requirements.

In December 1996 the Company redeemed all of the outstanding $100 million 7%
Convertible Debentures dated July 1, 1988. The redemption price was 101.4
percent of the principal amount plus interest accrued to the redemption date.

As a result of the redemption, the Company incurred a pre-tax charge of $2.2
million in the fourth quarter ($1.3 million after tax or $.02 per share).
Approximately $.8 million of the pre-tax charge represented previously
unamortized debt issuance cost. If the redemption of the debentures had taken
place on January 1, 1996, fully diluted earnings per share would have increased
by $.06 to $2.01 for the year ended December 31, 1996.

At December 31, 1996 the Company maintained one $25 million (notional amount)
Interest Swap contract. As of December 31, 1996, it required the Company to pay
a fixed rate of 8.7 percent in exchange for a floating rate receipt which was
5.7 percent. Throughout 1996, floating interest rate borrowings outstanding
exceeded the amount of this Interest Swap. Therefore, no mark-to-market
provision was taken during the year. This Interest Swap matures in 1999.

The differences in swapped interest rates are paid every three months pursuant
to the Interest Swap contract. The Company is exposed to credit loss in the
event of nonperformance by the other party to the Interest Swap contract but
does not anticipate nonperformance. The net payments under the Interest Swap
are dependent on the level of floating commercial paper interest rates.

Based on interest rates at December 31, 1996 the net termination cost for the
Company to unwind its Interest Swap was approximately $1.5 million.





                                     II-37
<PAGE>   60
OTHER LONG-TERM LIABILITIES

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

<TABLE>
<CAPTION>
                                                                                          December 31
                                                                           --------------------------------------
                                                                                  1996                   1995
                                                                           --------------------------------------
 <S>                                                                          <C>                    <C>
 Deferred income taxes                                                         $  48,709             $  43,314
 Minority interests                                                                7,573                 7,808
 Accrued postretirement benefit cost                                             124,867               123,260
 Accrued pension liability                                                        16,898                16,466
 Other                                                                             5,094                 3,463
                                                                           --------------------------------------

 Total other long-term liabilities                                             $ 203,141             $ 194,311
                                                                           ======================================
</TABLE>


COMMON EQUITY INTERESTS

Holders of Exchangeable Shares have voting, dividend and liquidation rights
which parallel those of holders of the Company's Common Shares. The
Exchangeable Shares are exchangeable into the Company's Common Shares 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
Shares. The Company has agreed not to pay dividends on its Common Shares
without causing LCI to declare an equivalent dividend in Canadian dollars on
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, 1996 the Company had reserved for issuance approximately 9.3
million Common Shares to allow for the exchange of outstanding Exchangeable
Shares. Additional common equity shares are reserved to cover grants under the
Company's stock option program (5.3 million), employee stock purchase plan (.7
million), and issuances pursuant to the Company's optional stock dividend plan
(.4 million).

OPTIONAL STOCK DIVIDEND PLAN

The Company has an optional stock dividend plan which 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, 1996 the Company maintained two stock-based compensation plans
- a fixed stock option plan and an employee stock purchase plan. The Company
applies APB Opinion 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





                                     II-38
<PAGE>   61
determined based on the fair value at the grant dates for awards under those
plans consistent with the method prescribed by SFAS No.  123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                                                                  1996                   1995
                                                                       -----------------------------------------------
 <S>                                                                        <C>                    <C>
 NET INCOME
   As reported                                                                 $ 140,866             $ 129,600
   Pro forma                                                                   $ 139,803             $ 129,077

 PRIMARY EARNINGS PER SHARE
   As reported                                                                 $    2.01             $    1.88
   Pro forma                                                                   $    2.00             $    1.88
                                                                                                        
 FULLY DILUTED EARNINGS PER SHARE                                                                       
   As reported                                                                 $    1.95             $    1.82
   Pro forma                                                                   $    1.94             $    1.82
</TABLE>                                                             

Because 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 Employee Stock Option Plan, options to purchase the Company's Common
Shares 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 are exercisable at the end of each
year following the date of grant. The director options are exercisable based
upon 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 1996 and 1995, respectively: dividend yield of 2.12 and 2.08
percent; expected volatility of 37.0 and 38.4 percent; risk-free interest rates
of 5.65 and 7.55 percent; and expected lives of 5.4 and 5.4 years.





                                     II-39
<PAGE>   62
A summary of the status of the Company's fixed stock option plans as of
December 31, 1996, 1995 and 1994, and changes during the years ended on these
dates are presented below:

<TABLE>
<CAPTION>
                                                                Years Ended December 31
                              ----------------------------------------------------------------------------------------------
                                               1996                          1995                        1994
                              ----------------------------------------------------------------------------------------------
                                                     Average                       Average                       Average
                                                     Option                        Option                        Option
                                      Shares          Price        Shares           Price       Shares            Price
                              ----------------------------------------------------------------------------------------------
 <S>                                 <C>             <C>          <C>               <C>         <C>               <C>
 Balance outstanding at                                                                                                 
   beginning of year                 2,319,837        $17.33      2,153,720         $17.06      2,449,228         $14.79
 Options granted                       492,000         18.88        483,800          18.00        467,000          24.13
 Options exercised                    (194,925)        14.47       (134,308)         13.41       (684,633)         13.88
 Options canceled                     (135,625)        19.11       (183,375)         19.11        (77,875)         15.77
                              ----------------------------------------------------------------------------------------------
 Balance outstanding at end                                                                                             
   of year                           2,481,287        $17.87      2,319,837         $17.33      2,153,720         $17.06
                              ==============================================================================================

 Options exercisable at end                                                                                             
   of year                           1,452,937        $16.83      1,379,037         $16.09      1,081,720         $15.21
                              ==============================================================================================
 Weighted-average fair value
   of options granted 
   during the year                                    $ 6.65                        $ 7.09
                              ==============================================================================================
</TABLE>


As of December 31, 1996 the 2.5 million fixed stock options outstanding under
the plans have an exercise price between $10.875 and $24.125 and a
weighted-average remaining contractual life of 6.34 years.

The Company has an Employee Stock Purchase Plan that 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 1996, 64,345 shares were issued to employees under the plan
at a share price of $17.33 and in 1995, 62,522 shares were issued at a share
price of $17.21. At December 31, 1996 and 1995, $.7 million and $.6 million
were subscribed for future share purchases, respectively.





                                     II-40
<PAGE>   63
INCOME TAXES

Pre-tax income is summarized by country in the following table (in thousands):

<TABLE>
<CAPTION>
                                                                              Years Ended December 31
                                                        -------------------------------------------------------------------
                                                            1996                       1995                      1994
                                                        -------------------------------------------------------------------
 <S>                                                      <C>                        <C>                       <C>
 United States*                                            $ 97,267                   $ 57,908                  $ 56,691
 Canada*                                                    125,061                    112,259                    56,396
                                                        -------------------------------------------------------------------
 Pre-tax income                                            $222,328                   $170,167                  $113,087
                                                        ===================================================================
</TABLE>


*        The 1996 and 1995 amounts shown for Canada and the United States
         include $13.7 million and $30.1 million, respectively, of adjustments
         resulting from an agreement reached with Revenue Canada Taxation (as
         described below). If these adjustments were not reflected, 1996 and
         1995 pre-tax income in Canada would be decreased and pre-tax income in
         the U.S. would be increased by $13.7 million and $30.1 million,
         respectively.

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


<TABLE>
<CAPTION>
                                                                          Years Ended December 31
                                                               --------------------------------------------
                                                                  1996            1995            1994
                                                               --------------------------------------------
 <S>                                                             <C>            <C>             <C>
 Current
    United States                                                $27,600         $25,300         $21,600
    Canada                                                        45,371          40,355          32,818
                                                               --------------------------------------------
 Total current                                                    72,971          65,655          54,418
                                                               --------------------------------------------

 Deferred
    United States                                                  8,800         (26,300)        (15,600)
    Canada                                                          (309)          1,199          (6,367)
                                                               --------------------------------------------
 Total deferred                                                    8,491         (25,101)        (21,967)
                                                               --------------------------------------------
 Total income taxes                                              $81,462         $40,554         $32,451
                                                               ============================================
</TABLE>


The Company's U.S. federal tax liability has not been finalized by the Internal
Revenue Service for any year subsequent to 1983 due to the prior existence of
tax net operating loss and credit carryforwards. During 1995 an agreement was
reached with Revenue Canada Taxation related to the pricing of certain cement
sales between the Company's operations in Canada and the U.S. for the years
1984 through 1994. The result was an increase in net sales and pre-tax income
in Canada by U.S. $30.1 million with corresponding adjustments in the U.S.
During 1996, the Company recorded a $13.7 million adjustment for the year 1995
based on the aforementioned agreement with Revenue Canada Taxation. The impact
of these adjustments was immaterial to consolidated net income. 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 which is not in accordance with the Convention.
The Company's Canadian federal tax liability for all taxation years through
1992 has been reviewed and finalized by Revenue Canada Taxation.





                                     II-41
<PAGE>   64
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
                                                                ---------------------------------------------------
                                                                   1996              1995                  1994
                                                                ---------------------------------------------------
 <S>                                                                <C>              <C>                   <C>
 Taxes at the U.S. federal income tax rate                          $77.8             $59.6                 $39.6
 U.S./Canadian tax rate differential                                  3.7               3.4                   1.7
 Canadian tax incentives                                             (8.0)             (7.0)                 (3.2)
 State and Canadian provincial income taxes,
   net of federal benefit                                             8.6               8.2                   5.9
 Change in valuation allowance                                         --             (23.0)                   --
 Tax effect of certain operating losses and
   other tax credits, primarily U.S.                                   --              (1.8)                (21.8)
 Other items                                                         (0.6)              1.2                  10.3
                                                                ---------------------------------------------------
 Provision for income taxes                                         $81.5             $40.6                 $32.5
                                                                ===================================================
</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.

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


<TABLE>
<CAPTION>                                                                                  
                                                                                                    December 31
                                                                                       --------------------------------------
                                                                                           1996                  1995
                                                                                       --------------------------------------
 <S>                                                                                      <C>                   <C>
 Deferred tax assets:
    Reserves and other liabilities                                                        $ 48,980              $ 54,760
    Other postretirement benefits                                                           49,785                48,888
    Tax loss carryforwards                                                                   4,745                 6,689
    Tax credit carryforwards                                                                 2,558                 6,562
                                                                                       --------------------------------------
 Gross deferred tax assets                                                                 106,068               116,899
 Valuation allowance                                                                       (23,296)              (23,296)
                                                                                       --------------------------------------
 Net deferred tax assets                                                                    82,772                93,603
                                                                                       --------------------------------------
 Deferred tax liabilities:
    Property, plant and equipment                                                           85,875                88,998
    Prepaid pension asset                                                                   27,587                26,640
    Other                                                                                    4,505                 4,863
                                                                                       --------------------------------------
 Gross deferred tax liabilities                                                            117,967               120,501
                                                                                       --------------------------------------
 Net deferred tax liability                                                                 35,195                26,898
 Net deferred tax asset-current                                                             13,514                16,416
                                                                                       --------------------------------------
 Net deferred tax liability- noncurrent                                                   $ 48,709              $ 43,314
                                                                                       ======================================
</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.
During 1995, the net decrease in the valuation allowance was $23.0 million. The
1995 reduction stems from the favorable long-term outlook for the U.S. cement
market, three consecutive years of taxable income in the U.S. and management's





                                     II-42
<PAGE>   65
projections of future taxable income in the U.S. which is expected to be in
excess of amounts needed to realize these deferred tax assets.

At December 31, 1996 the Company had net operating loss and tax credit
carryforwards of $12.2 million and $2.6 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.

Included in deferred tax assets is approximately $9.2 million which represents
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, 1996 cumulative undistributed earnings of LCI were $713.7
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 impracticable since it would depend
upon a number of factors which would not be known until such time as a decision
to repatriate the earnings was made.

SEGMENT INFORMATION

The Company's single business segment includes the manufacture and sale of
cement and ready-mixed concrete, precast and prestressed concrete components,
concrete block and pipe, aggregates, reinforcing steel and gypsum wallboard. In
addition, the Company is engaged in road building and other construction
utilizing many of its own products, and in supplying cement plants with
substitute fuels and raw materials.

Sales between the United States and Canada are accounted for at fair market
value. Income from operations equals net sales plus other income less cost of
goods sold, and selling and administrative expenses. It excludes interest
expense and income taxes.  Financial information by country is as follows (in
millions):





                                     II-43
<PAGE>   66
<TABLE>
<CAPTION>
                                                                              Years Ended December 31
                                                            --------------------------------------------------------------
                                                                  1996                   1995                    1994
                                                            --------------------------------------------------------------
 <S>                                                           <C>                   <C>                    <C>
 Net Sales*
   Canada                                                      $    777.5             $    722.3             $     717.1
   United States                                                    953.6                  821.1                   904.9
   Eliminations                                                     (81.8)                 (71.2)                  (58.7)
                                                            --------------------------------------------------------------
 Total net sales                                               $  1,649.3             $  1,472.2             $   1,563.3
                                                            ==============================================================

 Income from operations*
   Canada                                                      $    104.7             $     75.5             $      49.9
   United States                                                    131.7                  109.9                    92.0
                                                            --------------------------------------------------------------
 Total income from operations                                  $    236.4             $    185.4             $     141.9
                                                            ==============================================================

 Identifiable assets
   Canada                                                      $    923.3             $    845.6             $     791.3
   United States                                                    889.7                  868.3                   860.1
                                                            --------------------------------------------------------------
 Total identifiable assets                                     $  1,813.0             $  1,713.9             $   1,651.4
                                                            ==============================================================
</TABLE>


*        The 1996 and 1995 amounts shown as income from operations for Canada
         and the United States exclude $13.7 million and $30.1 million,
         respectively, of adjustments resulting from an agreement reached with
         Revenue Canada Taxation (as described in the "Income Taxes" footnote).
         If these adjustments were reflected, net sales and income from
         operations in Canada would be increased with corresponding adjustments
         in the U.S. There would be no impact on consolidated income from
         operations.

SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities included the issuance of 859,000,
851,000 and 540,000 common equity shares upon the reinvestment of dividends
totaling $15.8, $15.8, and $10.3 million in 1996, 1995 and 1994, respectively.

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


<TABLE>
<CAPTION>
                                                                                   Years Ended December 31
                                                                     ------------------------------------------------------
                                                                        1996                 1995                 1994
                                                                     ------------------------------------------------------
 <S>                                                                   <C>                  <C>                  <C>
 Interest                                                              $17,595              $15,944              $29,159
 Income taxes
   (net of refunds)                                                    $74,188              $75,218              $41,779
                                                                     ======================================================
</TABLE>





                                     II-44
<PAGE>   67
PENSION PLANS

The Company has several defined benefit and defined contribution retirement
plans covering substantially all employees. Benefits paid under the defined
benefit plans are generally based either on 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.

The following table summarizes the consolidated funded status of the Company's
defined benefit retirement plans and provides a reconciliation to the
consolidated prepaid pension asset recorded on the Company's Consolidated
Balance Sheets at December 31, 1996 and 1995 (in millions). For 1996 and 1995,
the assumed settlement interest rate was 7.5 percent for the Company's U.S.
plans and 7.5 and 8.25 percent, respectively, for the Canadian plans. For 1996
and 1995, the assumed rates of increase in future compensation levels used in
determining the actuarial present values of the projected benefit obligations
was 4.5 percent for the Company's U.S.  plans and 4.25 percent for the Canadian
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.

<TABLE>
<CAPTION>
                                                               December 31, 1996                       December 31, 1995        
                                                    ----------------------------------------------------------------------------
                                                       Assets Exceed        Accumulated        Assets Exceed       Accumulated  
                                                        Accumulated           Benefits          Accumulated          Benefits   
                                                         Benefits           Exceed Assets         Benefits        Exceed Assets 
                                                    ----------------------------------------------------------------------------
 <S>                                                     <C>                <C>                <C>                <C>
 Actuarial present value of:
   Vested benefit obligations                            $ 316.4             $  36.0            $ 288.7            $  37.1
   Accumulated benefit obligations                         319.7                39.4              292.1               40.6
                                                    ----------------------------------------------------------------------------

 Projected benefit obligation for service
   rendered to date                                      $ 354.5             $  43.1            $ 323.5            $  43.5
   Market value of plan assets                             433.4                17.2              403.9               19.5
                                                    ----------------------------------------------------------------------------
 Plan assets in excess of (less than)
   projected benefit obligations                            78.9               (25.9)              80.4              (24.0)
 Unrecognized net loss due to past
   experience different
   from assumptions made                                     6.3                 6.7                5.7                5.2
 Unrecognized prior service costs                           11.1                 1.2                9.3                0.9
 Unrecognized net (assets)
   obligations at transition
   to SFAS No. 87                                           (8.1)                1.1              (10.2)               1.4
                                                    ----------------------------------------------------------------------------
 Prepaid pension asset (accrued
   pension liability)                                    $  88.2            $  (16.9)           $  85.2           $  (16.5)
                                                    ============================================================================
</TABLE>





                                     II-45
<PAGE>   68
Net retirement cost for the years indicated includes the following components
(in millions):

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31
                                                                    -------------------------------------------------------
                                                                        1996                1995                 1994
                                                                    -------------------------------------------------------
 <S>                                                                  <C>                  <C>                  <C>
 Service cost of benefits earned during
    the period                                                        $     9.7            $    8.5               $ 11.2
 Interest cost on projected benefit obligation                             28.5                28.1                 26.1
 Actual gain on plan assets                                               (50.9)              (61.3)                (7.5)
 Net amortization and deferral                                             17.3                26.4                (26.8)
 Total defined benefit plans cost                                           4.6                 1.7                  3.0
 Defined contribution plans cost                                            3.8                 3.6                  4.2
                                                                    -------------------------------------------------------

 Net retirement cost                                                  $     8.4            $    5.3               $  7.2
                                                                    =======================================================
</TABLE>

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 $3.7
million, $3.2 million and $3.4 million for 1996, 1995 and 1994, respectively.
The data available from administrators of the multi-employer plans are not
sufficient to determine the accumulated benefit obligation, nor the net assets
attributable to the multi-employer plans in which Company employees
participate.

The defined contribution plans' costs in the preceding table relate to thrift
savings plans for eligible U.S. and Canadian employees. Under the provisions of
the plans, the Company matches a portion of each participant's contribution
and, for eligible U.S. employees through June 30, 1994, contributed an amount
proportionate to each participant's salary.

OTHER POSTRETIREMENT BENEFITS

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 Canada and the U.S. Benefits, eligibility and cost-sharing
provisions for hourly employees vary by location and/or bargaining unit.
Generally, the health plans pay a stated percentage of most medical/dental
expenses reduced for any deductible, co-payment 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 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 $1,000,000
health care lifetime maximum benefit. At age 65 or over, the maximum is
$50,000. Lifetime maximums for hourly retirees are governed by the location
and/or bargaining agreement in effect at the time of retirement. In Canada,
some units have maximums, but in most cases there are no lifetime maximums. In
some units in Canada, spouses of retirees have lifetime medical coverage.





                                     II-46
<PAGE>   69
In Canada, both salaried and nonsalaried employees are generally eligible for
life insurance benefits. In the U.S., life insurance is provided for a number
of hourly retirees as stipulated in their hourly bargained agreements, but not
for salaried retirees except those of certain acquired companies.

The following table sets forth the plans' combined status reconciled with the
accrued postretirement benefit cost included in the Company's Consolidated
Balance Sheets (in thousands):

<TABLE>
<CAPTION>
                                                                                           December 31
                                                                                ---------------------------------------
                                                                                      1996                 1995
                                                                                ---------------------------------------
 <S>                                                                               <C>                  <C>
 Accumulated postretirement benefit obligation
     Retirees                                                                       $  74,832            $  72,864
     Fully eligible active participants                                                13,417               15,330
     Other active participants                                                         19,646               19,537
                                                                                ---------------------------------------
 Total accumulated post retirement benefit obligation                                 107,895              107,731
 Unrecognized net gain                                                                 13,320               11,274
 Unrecognized prior service cost                                                        3,652                4,255
                                                                                ---------------------------------------
 Accrued postretirement benefit cost                                                $ 124,867            $ 123,260
                                                                                =======================================
</TABLE>

Net periodic postretirement benefit cost includes the following components (in
thousands):


<TABLE>
<CAPTION>
                                                                               Years Ended December 31
                                                                    --------------------------------------------------------
                                                                        1996                 1995                 1994
                                                                    --------------------------------------------------------
<S>                                                                   <C>                  <C>                   <C>
 Service cost of benefits earned during the period                     $ 1,412               $1,285               $1,687
 Interest cost on accumulated post retirement                                                                           
    benefit obligation                                                   7,683                8,046                8,040
 Net amortization                                                       (1,109)              (1,390)                (492)
                                                                    --------------------------------------------------------
 Net periodic postretirement benefit cost                              $ 7,986               $7,941               $9,235
                                                                    =========================================================
</TABLE>

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 10.1 percent
decreasing to 5.5 percent over 11 years. For post-65 retirees in the U.S., the
assumed rate was 7.7 percent decreasing to 5.5 percent over 11 years with a
Medicare assumed rate for the same group of 7.1 percent decreasing to 5.5
percent over 11 years. For post-65 retirees in Canada, the assumed rate was 9.6
percent decreasing to 5.5 percent over 11 years. If the health care cost trend
rate assumptions were increased by 1.0 percent, the accumulated postretirement
benefit obligation as of December 31, 1996 would be increased by 8.0 percent.
The effect of this change on the net periodic postretirement benefit cost for
1996 would be an increase of 12.9 percent.

For 1996 and 1995, the weighted average discount rates used in determining the
accumulated postretirement benefit obligations were 7.5 percent for U.S. plans
in both years and 7.5 percent for 1996 and 8.25 percent for 1995 for Canadian
plans.







                                     II-47
<PAGE>   70

COMMITMENTS AND CONTINGENCIES

The Company leases office space and certain equipment. Total rental expenses
for 1996, 1995 and 1994 were $15.1 million, $14.1 million and $13.1 million,
respectively.

Future minimum annual rental commitments for all non-cancelable leases are as
follows (in thousands):

<TABLE>
 <S>                                                   <C>
 1997                                                  $12,181
 1998                                                   10,876
 1999                                                   10,010
 2000                                                    9,214
 2001                                                    8,459
 Thereafter                                             18,557
                                                  ----------------
    Total                                              $69,297
                                                  ================
</TABLE>

The Company self insures for workers' compensation 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.

Since 1992 a number of owners of buildings located in eastern Ontario, Canada,
most of whom are residential homeowners, filed actions in the Ontario Court
(General Division) against Bertrand & Frere Construction Company Limited
("Bertrand") and a number of other defendants seeking damages as a result of
allegedly defective footings, foundations and floors made with ready-mixed
concrete supplied by Bertrand. There are presently approximately 168 plaintiffs
whose claims involve 104 foundations, which are embodied in ten lawsuits. In
two of these actions, the plaintiffs have added LCI as a party defendant; in
the others, LCI is either a third or fourth party. The damages claimed total
more than Cdn. $62 million. In the largest of these actions, approximately 119
plaintiffs are complaining about 81 basement foundations, including a 20-unit
condominium, and claiming approximately Cdn. $51.7 million, each plaintiff
seeking Cdn. $200,000 for costs of repairs and loss of capital value of their
respective home or building, Cdn. $200,000 for punitive and exemplary damages
and Cdn. $20,000 for hardship, inconvenience and mental distress, together with
interest and costs. LCI has been served with cross-claims or third or fourth
party claims by Bertrand in the referenced lawsuits. Bertrand is seeking
indemnity for its liability to the owners as a result of the supply by LCI of
allegedly defective fly ash and cement. In 1995 the Ontario New Home Warranty
Program instituted a lawsuit against Bertrand, LCI and certain other defendants
to recover approximately Cdn. $3 million in costs for replacing or repairing
the foundations of 29 houses which were covered under the warranty program. The
amount of LCI's liability, if any, is uncertain. LCI has denied liability and
is defending the lawsuits vigorously. It has introduced third and fourth party
claims against its insurers to have the insurance coverage issues dealt with by
the Court at the same time as the liability case. The Company believes it has
substantial insurance coverage that will respond to defense expenses and
liability, if any, in the lawsuits.

In late August 1996 the Company, among others, was served with original
petitions from two sets of plaintiffs in two similar lawsuits brought in state
courts in Starr and Duval Counties, Texas. In the first suit approximately 180
plaintiffs sued approximately 170 defendants involved in the production,
transportation and use of cement, concrete, additives, sand, and gravel
alleging that these materials contain toxic substances, that the plaintiffs
were exposed to the toxic substances in their work areas where they breathe the
fumes, inhale the particles and absorb the materials from them which caused





                                     II-48
<PAGE>   71
injury to their respiratory and nervous systems and brain damage. The
plaintiffs claim negligence, gross negligence, and products and strict
liability and seek, among other things, both past and future damages, exemplary
damages and cost of the suit in an unspecified amount. In the second suit
approximately 70 plaintiffs sued approximately 225 defendants alleging claims
similar to those contained in the first suit with an added claim that
plaintiffs suffered exposure to defendants' toxic substances in their homes.
While the amount of liability, if any, to the Company is uncertain, the Company
filed general denials to both suits in late October 1996 and is vigorously
defending the lawsuits. Discovery and venue issues are underway and there is
yet no trial setting in either of these cases.

The Company has been notified by the EPA that it is one of several potentially
responsible parties for clean-up costs at certain waste disposal sites.  The
ultimate costs related to such matters and the Company's degree of
responsibility, in some of these matters, is not presently determinable.

When the Company determines that it is probable that a liability for
environmental matters or other legal actions has been incurred, an estimate of
the required remediation costs is recorded as a liability in the financial
statements.  As of December 31, 1996 and 1995, the liabilities recorded for
environmental obligations were not material. Management has concluded that the
possibility that any material liability in excess of the amounts reported in
the balance sheet is remote.

In addition, the Company is involved in certain other legal actions and claims.
It is the opinion of management that all legal and environmental matters will
be resolved without material effect on the Company's consolidated financial
statements.


RELATED PARTY TRANSACTIONS

The Company is a participant to agreements with Lafarge S.A. for the sharing of
certain costs incurred for technical, research and managerial assistance and
for the use of certain trademarks. The net expenses accrued for these services
were $5.3 million, $5.5 million and $4.3 million during 1996, 1995 and 1994,
respectively. In addition, the Company purchases various products from Lafarge
S.A. Such purchases totaled $52.1 million, $27.7 million and $11.7 million in
1996, 1995 and 1994, respectively. All transactions with Lafarge S.A. were
conducted on an arm's length basis.

Lafarge S.A. reinvested a portion of dividends it was entitled to receive on
the Company's Common Shares during 1996, 1995 and 1994.  These reinvestments
totaled $13.2 million, $12.4 million and $9.5 million, respectively.

In December 1996 ( as described in the "Debt" footnote), the Company redeemed
all of the $100 million outstanding 7% Convertible Debentures, including $15
million held by Lafarge S.A.

At year end, $50 million of the Company's short-term borrowings were from
Lafarge S.A. and its subsidiaries.

SUBSEQUENT EVENT (UNAUDITED)

In March 1997 the Company extended the maturity date of $50 million in
short-term borrowings from Lafarge S.A. and borrowed an additional $50 million.





                                     II-49
<PAGE>   72
QUARTERLY DATA (UNAUDITED)

The following table summarizes financial data by quarter for 1996 and 1995 (in
millions, except per share information):


<TABLE>
<CAPTION>
                                                    First         Second        Third         Fourth          Total
                                                -------------------------------------------------------------------------
 <S>                                              <C>           <C>           <C>           <C>             <C>
 1996
 Net Sales                                          $  204         $  421        $ 576          $ 448         $ 1,649
 Gross profit (loss)                                   (20)           114          182            121             397
 Net income (loss)                                     (38)            43           85             51             141
 Net income (loss) per                                      
   common equity share (a):                                 
     Primary                                         (0.55)          0.62         1.21           0.73            2.01
     Fully diluted                                   (0.55)          0.59         1.15           0.70            1.95
                                                 ========================================================================
                                                            
<CAPTION>
                                                     First         Second        Third         Fourth          Total
                                                -------------------------------------------------------------------------

 <S>                                              <C>           <C>           <C>           <C>             <C>
 1995
 Net Sales                                         $   197         $ 396         $ 510          $ 369         $ 1,472
 Gross profit (loss)                                   (16)          103           146             90             323
 Net income (loss)                                     (42)           50            86             36             130
 Net income (loss) per
    common equity share (a):
     Primary                                         (0.62)         0.72          1.24           0.52            1.88
     Fully diluted                                   (0.62)         0.70          1.19           0.50            1.82
                                                 ========================================================================
</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.





                                     II-50
<PAGE>   73
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

              None





                                     II-51
<PAGE>   74


                                    PART III


ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

The section entitled "Election of Directors" appearing on pages 5 through 8 of
the Company's proxy statement for the annual meeting of stockholders to be held
on May 6, 1997 sets forth certain information with respect to the directors and
nominees for election as directors of the Company and is incorporated herein by
reference.  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.





                                     III-1
<PAGE>   75


ITEM 11.       EXECUTIVE COMPENSATION

The section entitled "Executive Compensation" appearing on pages 8 through 18
of the Company's proxy statement for the annual meeting of stockholders to be
held on May 6, 1997 sets forth certain information with respect to the
compensation of management of the Company, and is incorporated herein by
reference.





                                     III-2
<PAGE>   76


ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The sections entitled "Voting Securities", "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" appearing on pages 1
through 5 and "Election of Directors" appearing on pages 5 through 8 of the
Company's proxy statement for the annual meeting of stockholders to be held on
May 6, 1997 set forth certain information with respect to the ownership of the
Company's voting securities, and are incorporated herein by reference.





                                     III-3
<PAGE>   77


ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The sections entitled "Executive Compensation - Indebtedness of Management" and
"Executive Compensation - Transactions with Management and Others" appearing on
page 18 of the Company's proxy statement for the annual meeting of stockholders
to be held on May 6, 1997 set forth certain information with respect to
relations of and transactions by management of the Company, and are
incorporated herein by reference.





                                     III-4
<PAGE>   78


                                    PART IV

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

(a)     The following documents are filed as part of this Annual Report:

1.  Financial Statements

    Consolidated Financial Statements filed as part of this Form 10-K are
listed under Part II, Item 8.

2.  Financial Statement Schedule


<TABLE>
<CAPTION>
                                                                    Page Number 
                                                                    -----------
<S>                                                                 <C>
 Consolidated Supporting Schedule

 II - Valuation and Qualifying Accounts                             IV-7
</TABLE>

 Schedules I, III, IV and V have been omitted because they are not applicable.





                                     IV-1
<PAGE>   79


3.       EXHIBITS


<TABLE>
<S>       <C>
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       By-Laws of the Company, (as most recently amended on July 29, 1994) [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, 1994].

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].

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].
</TABLE>





                                      IV-2
<PAGE>   80



<TABLE>
<S>       <C>
10.1      Exchange Agency and Trust Agreement dated as of May 1, 1983 among the Company, Canada Cement Lafarge, Lafarge Coppee and
          Montreal Trust Company, as trustee [incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Registration
          Statement on Form S-1 (Registration No. 2-82548) of the Company, filed with the Securities and Exchange Commission on May
          5, 1983].  Canada Cement Lafarge changed its name in 1988 to Lafarge Canada Inc.  Lafarge Coppee changed its name in 1995
          to Lafarge S.A.

10.2      Guarantee Agreement dated as of May 1, 1983 between the Company and Canada Cement Lafarge [incorporated by reference to
          Exhibit 10.2 to Amendment No. 1 to the Registration Statement of Form S-1 (Registration No. 2-82548) of the Company, filed
          with the Securities and Exchange Commission on May 5, 1983].

10.3      Special Surface Lease dated as of August 1, 1954 between the Province of Alberta and Canada Cement Lafarge, as amended
          [incorporated by reference to Exhibit 10.7 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      Stock Option Plan of the Company [incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K filed by the
          Company for the fiscal year ended December 31, 1993].

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 Report on Form 10-K filed by the Company for the fiscal year ended December 31,
          1993].
</TABLE>





                                      IV-3
<PAGE>   81



<TABLE>
<S>       <C>
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].

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].
</TABLE>





                                      IV-4
<PAGE>   82


<TABLE>
<S>       <C>
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.

10.21     Cost Sharing Agreement dated January 2, 1996 between Lafarge Materiaux de Specialities and the Company related to costs of
          a new unit established for researching potential profitable markets for their respective products in North America.

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.

10.23     Agreement dated December 9, 1996 between Transbanque, Lafarge S.A. and the Company related to an uncommited line of credit
          for $100 million.

11        Statement regarding computation of net income per common equity share.

21        Subsidiaries of the Company.
 
23        Consent of Arthur Andersen LLP, independent public accountants.
</TABLE>
 
(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.





                                      IV-5
<PAGE>   83


                        CONSOLIDATED SUPPORTING SCHEDULE





                                      IV-6
<PAGE>   84
                                                                   Schedule II

                      LAFARGE CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
                   Years Ended December 31, 1996, 1995, 1994
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                           Additions                    Deductions
                                                        ---------------     --------------------------------
                                                                            From Reserve
                                                                            for Purposes
                                                                              for Which
                                       Balance at         Charge to Cost      Reserve Was                        Balance at
    Descriptions                   Beginning of Year       and Expenses         Created           Other (1)      End of Year
----------------------------       ----------------       --------------    --------------        ---------      -----------
<S>                                  <C>                  <C>              <C>                   <C>               <C>
    Reserve applicable to
       current receivable

      For doubtful accounts:
                1996                 $   20,685           $      255       $    (2,108)          $   (39)          $ 18,793
                1995                 $   22,698           $      588       $    (2,843)          $   242           $ 20,685
                1994                 $   19,084           $    5,941       $    (1,842)          $  (485)          $ 22,698

      For cash and other
          discounts:
                1996                 $    3,542           $   30,909       $   (30,583)          $  (118)          $  3,750 
                1995                 $    5,649           $   30,691       $   (32,985)          $   187           $  3,542 
                1994                 $    4,988           $   34,567       $   (33,155)          $  (751)          $  5,649 
</TABLE>


--------------------

    (1) Primarily foreign currency translation adjustments


                                     IV-7
<PAGE>   85
                                  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          
                                     Senior Vice President and  
                                     Chief Financial Officer    
                                                                
                                     Date:  March 27, 1997      


           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
------------------------------------
 John M. Piecuch                                      President and Chief Executive Officer          March 27, 1997
                                                                  and Director


 /s/ LARRY J. WAISANEN
------------------------------------
 Larry J. Waisanen                                       Senior Vice President and Chief             March 27, 1997
                                                                Financial Officer

 /s/ JOHN C. PORTER
------------------------------------
 John C. Porter                                           Vice President and Controller              March 27, 1997


 /s/ BERTRAND P. COLLOMB
------------------------------------
 Bertrand P. Collomb                                                Director                         March 27, 1997
</TABLE>





                                                                 IV-8
<PAGE>   86




<TABLE>
 <S>                                                                <C>                              <C>
 /s/ THOMAS A. BUELL
------------------------------------
 Thomas A. Buell                                                    Director                         March 27, 1997


 /s/ MARSHALL A. COHEN
------------------------------------
 Marshall A. Cohen                                                  Director                         March 27, 1997


 /s/ BERNARD L. KASRIEL
------------------------------------
 Bernard L. Kasriel                                                 Director                         March 27, 1997


 /s/ JACQUES LEFEVRE
------------------------------------
 Jacques Lefevre                                                    Director                         March 27, 1997


 /s/ PAUL W. MACAVOY
------------------------------------
 Paul W. MacAvoy                                                    Director                         March 27, 1997


 /s/ CLAUDINE B. MALONE
------------------------------------
 Claudine B. Malone                                                 Director                         March 27, 1997


 /s/ ALONZO L. MCDONALD
------------------------------------
 Alonzo L. McDonald                                                 Director                         March 27, 1997


 /s/ ROBERT W. MURDOCH
------------------------------------
 Robert W. Murdoch                                                  Director                         March 27, 1997


 /s/ BERTIN F. NADEAU
------------------------------------
 Bertin F. Nadeau                                                   Director                         March 27, 1997


 /s/ JOHN D. REDFERN
------------------------------------
 John D. Redfern                                                    Director                         March 27, 1997


 /s/ JOE M. RODGERS
------------------------------------
 Joe M. Rodgers                                                     Director                         March 27, 1997
</TABLE>





                                                                 IV-9
<PAGE>   87





<TABLE>
 <S>                                                                <C>                              <C>
 /s/ MICHEL ROSE
------------------------------------
 Michel Rose                                                        Director                         March 27, 1997



 /s/ RONALD D. SOUTHERN
------------------------------------
 Ronald D. Southern                                                 Director                         March 27, 1997


 /s/ EDWARD H. TUCK
------------------------------------
 Edward H. Tuck                                                     Director                         March 27, 1997
</TABLE>





                                     IV-10
<PAGE>   88





                               INDEX OF EXHIBITS


<TABLE>
<CAPTION>
                                                                                                SEQUENTIALLY
                                                                                                  NUMBERED
 EXHIBIT NUMBERS                                                                                    PAGES
 ---------------        -----------------------------------------------------------------           -----
 <S>                    <C>
 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                    By-Laws of the Company, (as most recently amended on July 29,
                        1994) [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, 1994].

 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].

 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].
</TABLE>





                                     IV-11
<PAGE>   89


                               INDEX OF EXHIBITS


<TABLE>
<CAPTION>
                                                                                                SEQUENTIALLY
                                                                                                  NUMBERED
 EXHIBIT NUMBERS                                                                                    PAGES
 ---------------        -----------------------------------------------------------------           -----
 <S>                    <C>
 9.2                    Amendment dated June 10, 1983 to Trust Agreement filed as Exhibit
                        9.1 [incorporated by reference to Exhibit 9.2 to the Registration
                        Statement of Form S-1 (Registration No. 2-86589) of the Company,
                        filed with the Securities and Exchange Commission on September
                        16, 1983].

 10.1                   Exchange Agency and Trust Agreement dated as of May 1, 1983 among
                        the Company, Canada Cement Lafarge, Lafarge Coppee and Montreal
                        Trust Company, as trustee [incorporated by reference to Exhibit
                        10.1 to Amendment No. 1 to the Registration Statement on Form S-1
                        (Registration No. 2-82548) of the Company, filed with the
                        Securities and Exchange Commission on May 5, 1983].  Canada
                        Cement Lafarge changed its name in 1988 to Lafarge Canada Inc.
                        Lafarge Coppee changed its name in 1995 to Lafarge S.A.

 10.2                   Guarantee Agreement dated as of May 1, 1983 between the Company
                        and Canada Cement Lafarge [incorporated by reference to Exhibit
                        10.2 to Amendment No. 1 to the Registration Statement of Form S-1
                        (Registration No. 2-82548) of the Company, filed with the
                        Securities and Exchange Commission on May 5, 1983].

 10.3                   Special Surface Lease dated as of August 1, 1954 between the
                        Province of Alberta and Canada Cement Lafarge, as amended
                        [incorporated by reference to Exhibit 10.7 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].
</TABLE>





                                     IV-12
<PAGE>   90


                               INDEX OF EXHIBITS


<TABLE>
<CAPTION>
                                                                                                SEQUENTIALLY
                                                                                                  NUMBERED
 EXHIBIT NUMBERS                                                                                    PAGES
 ---------------        -----------------------------------------------------------------           -----
 <S>                    <C>
 10.5                   Stock Option Plan of the Company [incorporated by reference to
                        Exhibit 10.6 to the Annual Report on Form 10-K filed by the
                        Company for the fiscal year ended December 31, 1993].

 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 Report on Form 10-K filed by the
                        Company for the fiscal year ended December 31, 1993].

 10.10                  Deferred Compensation Program of Canada Cement Lafarge
                        [incorporated by reference to Exhibit 10.57 to Amendment No. 1 to
                        the Registration Statement on Form S-1 (Registration No. 2-86589)
                        of the Company, filed with the Securities and Exchange Commission
                        on November 23, 1983].
</TABLE>





                                     IV-13
<PAGE>   91


                                                INDEX OF EXHIBITS

<TABLE>
<CAPTION>
                                                                                                SEQUENTIALLY
                                                                                                  NUMBERED
 EXHIBIT NUMBERS                                                                                    PAGES
 ---------------        -----------------------------------------------------------------           -----
 <S>                    <C>
 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].

 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].
</TABLE>





                                     IV-14
<PAGE>   92


                               INDEX OF EXHIBITS


<TABLE>
<CAPTION>
                                                                                                SEQUENTIALLY
                                                                                                  NUMBERED
 EXHIBIT NUMBERS                                                                                    PAGES
 ---------------        -----------------------------------------------------------------           -----
 <S>                    <C>
 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.

 10.21*                 Cost Sharing Agreement dated January 2, 1996 between Lafarge
                        Materiaux de Specialities and the Company relating to costs of a
                        new unit established for researching potential profitable markets
                        for their respective products in North America.

 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.

 10.23*                 Agreement dated December 9, 1996 between Transbanque, Lafarge
                        S.A. and the Company related to an uncommitted line of credit for
                        $100 million.
</TABLE>





                                     IV-15
<PAGE>   93


                               INDEX OF EXHIBITS


<TABLE>
<CAPTION>
                                                                                                SEQUENTIALLY
                                                                                                  NUMBERED
 EXHIBIT NUMBERS                                                                                    PAGES
 ---------------        -----------------------------------------------------------------           -----
 <S>                    <C>
 11*                    Statement regarding computation of net income per common equity
                        share.

 21*                    Subsidiaries of the Company.

 23*                    Consent of Arthur Andersen LLP, independent public accountants.
</TABLE>





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





                                     IV-16