Exhibit 13

                           GIANT CEMENT HOLDING, INC.

                               1997 ANNUAL REPORT

                                 TO SHAREHOLDERS


<PAGE>



                                CORPORATE PROFILE





         GIANT CEMENT HOLDING,  INC.  manufactures  and sells a complete line of
portland and masonry cements used in residential,  commercial and infrastructure
construction applications. The Company is the 17th largest producer of cement in
the United States.  Its two  manufacturing  facilities are fully integrated from
limestone  mining  through  cement  production  and  serve the  rapidly  growing
South-Atlantic and the Middle-Atlantic regions of the United States. The Company
pioneered  resource  recovery  techniques for use in the manufacturing of cement
and is one of the largest users of waste-derived fuels in the cement industry.




























Contents
Financial Highlights, 1
Letter To Shareholders, 2
Business Review, 4
Consolidated Financial Statements, 6
Notes to Consolidated Financial Statements, 10
Report of Independent Accountants, 19
Management's Discussion and Analysis, 20
Corporate Information, 26
Directors and Officers, 28


<PAGE>


            FIVE-YEAR SUMMARY OF CONSOLIDATED FINANCIAL DATA

                                   1997      1996        1995      1994    1993
                                   ----      ----        ----      ----    ----
                                 (amounts in thousands, except per share data)
Income statement data:
  Total revenues           $116,888    $110,198   $100,185   $ 90,802  $ 81,900
  Gross profit               35,132      32,380     27,314     20,443    14,845
  Operating income           26,409      24,539     19,767     13,752     8,725
  Net income                 16,085      15,421     12,715      9,195     5,148

  Earnings per common share:
    Basic                  $   1.70    $   1.57   $   1.27   $    .92  $    .51
    Diluted                $   1.69    $   1.57   $   1.27   $    .92  $    .51
  Cash dividends                -           -          -          -         -
  Weighted average common
    shares outstanding        9,459       9,833      9,990     10,000    10,000

Balance sheet and other data:
   Working capital         $  29,778   $ 26,706   $ 17,539  $  20,513  $ 12,228
   Total assets              128,600    118,616    111,714     90,525    80,944
   Long-term debt             10,549     11,751     15,525      8,403     9,312
   Shareholders' equity       87,645     77,128     64,614     54,203    42,394
   Return on beginning of year
     shareholders' equity       20.9%      23.9%      23.5%      21.7%     13.5%




<PAGE>


LETTER TO SHAREHOLDERS

GIANT  CEMENT  HOLDING,  INC.  reported  its fourth  consecutive  record year of
earnings in 1997.  The message  this year is very  similar to last  year's.  All
aspects of the Company's  business improved,  margins continued to improve,  and
the balance sheet remains very strong. The Company's 14% return on sales and 21%
return on equity  rewarded  investors as the stock price  increased  40% for the
second year in a row but still traded at a reasonable 13.5 times 1997 earnings.

For the year,  basic earnings per share  increased 20% to $1.88,  before special
charges of $.18 per share,  compared  with $1.57 a year  earlier.  Record  sales
volume and revenue,  record clinker and cement  production and record waste fuel
utilization all contributed to the increase in earnings. Revenues increased 6.1%
to $116.9 million, up from $110.2 million in 1996. Operating income increased by
7.6% to $26.4 million, which represented a 22.6% operating margin.

As a  result  of the  strong  operating  performance,  the  Company  was able to
repurchase 387,000 shares of its common stock, fund capital  expenditures of $15
million,  significantly  reduce its unfunded pension liability and still end the
year with a healthy balance sheet. At year end, the Company's  current ratio was
2.4,  working  capital was $30  million and cash  totaled  $12.7  million,  $2.2
million more than the total debt of $10.5 million.

We are pleased  with the  performance,  and it is  certainly  our  intention  to
continue to improve  shareholder value. The Company believes the best use of its
cash is to invest in its  plants  and  purchase  stock  through  its  repurchase
program.  Since the Company  went public in October  1994,  over $50 million has
been  invested in its  operations.  We believe we have caught up on  maintenance
capital  expenditures  and are now in a position to focus more heavily on profit
enhancement  expenditures  in the future,  all of which we would  expect to fund
with internally-generated  cash. In 1997, the Company's third $5 million buyback
program was announced,  and $2.3 million of that amount remains  available.  The
Board  continues to believe the periodic  repurchasing  of the Company's  common
stock represents a good use of available cash.

The Company  continues to cooperate  with the Justice  Department  in connection
with its planned acquisition of Solite and certain of its lightweight  aggregate
and block manufacturing  operations.  The Solite acquisition,  at a cost of only
325,000  shares and the  assumption of $20.0 million in debt,  will increase the
Company's  revenues by approximately 45% and should be accretive to earnings per
share in 1998 if the Company can  consummate  the  merger.  However,  due to the
basis in which the Company and Solite are pursuing clearance for the merger, the
Department of Justice is requiring Solite to retain an investment banker, and to
market the assets that the Company  will  acquire in the merger.  If no bonafide
purchaser  results from the  marketing  efforts in 30 days,  the  Department  of
Justice has indicated that clearance for the merger would be granted.

Keystone  continues to work with the  Pennsylvania  Department of  Environmental
Protection  ("DEP") to resolve their concerns  related to the fire that occurred
at Keystone's  fuel storage tank farm in December.  The process is taking longer
than we would like;  however,  the safety of our employees  and the  surrounding
communities is of utmost  importance to us. We are hopeful that all of the DEP's
concerns  can be  resolved  and  Keystone  can resume  utilization  of  resource
recovery fuels early in the second quarter.

The  favorable  fundamentals  driving our  industry are very much in place as we
<PAGE>

look to the future.  The United States cement  industry is operating at capacity
and importing cement to meet customer demand. In addition, the new highway bill,
if passed, will add approximately $6 billion to the current $22 billion program.
This would be a  tremendous  benefit to the cement and  construction  industries
since  highway  spending  generally is more cement  friendly  than  residential,
commercial or other public outlays.

Our markets,  which serve the rapidly growing South-Atlantic and Middle-Atlantic
regions of the eastern United States, remain vibrant. We are optimistic that the
price  increases  of $4 per ton for  Keystone  and $3 per  ton for  Giant,  both
effective  April 1, 1998,  will hold;  and we expect to sell out at both plants.
Demand for cement is  expected  to exceed U. S.  capacity  for at least the next
five  years.  Cement  selling  prices  would have to increase  substantially  to
provide an adequate  return on investment for a greenfield  plant.  As a result,
only modest increases in U. S. capacity are expected through the year 2001.

In summary, we are pleased with the results achieved during 1997 and expect 1998
to be another good year.  Inventory levels are reasonably good, and we expect to
sell out the production of both plants.  While we have  demonstrated our ability
to increase  production and control costs,  our goal is to improve  further upon
shareholders'  long-term returns. We appreciate the efforts of our employees and
the support of our customers and shareholders in making 1997 a successful year.


Gary Pechota
Chairman, President and Chief Executive Officer
March 27, 1998


<PAGE>


                                 BUSINESS REVIEW

Generally  strong  economic   conditions   contributed  to  near  record  cement
consumption in 1997,  allowing for another record year of profits for the cement
industry.

Giant  Cement   Holding,   Inc.  was  able  to  capitalize  on  strong  industry
fundamentals increasing revenues by 6% to $116.9 million. Gross margins improved
to 30%, while  operating  margins  approached  23%. Net income in 1997 was $16.1
million,  compared with $15.4 million in 1996. Net income in 1997 was reduced by
after-tax  charges of  $900,000  relating  to a fire at  Keystone  and  $800,000
relating to the Solite acquisition.

Cement  sales volume  increased 1% for the year with the increase  coming in the
Middle-Atlantic market (Keystone Cement). Shipments in the South-Atlantic market
(Giant  Cement) were level with last year but both Giant and Keystone  were able
to sell  out  their  plant  production.  A  slight  pricing  improvement  in the
South-Atlantic  market and a 6% increase  in the pricing in the  Middle-Atlantic
market  contributed  to the  product  sales  revenue  increase  of 5% to  $100.1
million.   The   supply/demand   balance   continues  to  remain  tight  in  the
South-Atlantic region with a very significant improvement in the Middle-Atlantic
region.  The Company  announced a $4 per ton price increase at Keystone and a $3
per ton price increase at Giant,  both  effective  April 1, 1998. We believe the
price increases will hold.

During 1997 the Company was  successful in continuing its efforts to improve its
manufacturing  capabilities.  Clinker  production  increased 1.1% to 1.3 million
tons. This increase follows solid increases in both 1996 and 1995.  Contributing
to the record  clinker  production was an increase in the output of two of Giant
Cement's  kilns as a result of capital  improvements  early in the year.  Cement
production increased 3% to 1.5 million tons in 1997.

Per  unit  costs  were  approximately  1%  greater  than a year  ago,  a  slight
disappointment,  but still below the general  increases  in  inflation.  A large
portion  of the  cost  increase  was  related  to  depreciation  expense  due to
increased capital  expenditures over the last three years.  Gross profit per ton
increased  8% to $23.30  compared  with  $21.60 for 1996.  Selling,  general and
administrative  costs  decreased as a percentage of sales to 6% in 1997, from 7%
in 1996.

In spite of the waste fuel curtailment in December at Keystone,  1997 was a very
good year for resource recovery activities.  Liquid waste fuel volumes increased
7%, while solid waste fuel volumes  increased by 18%.  Pricing  improved on both
liquids and solids by  approximately  6% with total resource  recovery  revenues
increasing  14%.  The  Company's  strategy to move into  higher  revenue per ton
solids continues to be successful,  and the Company is considering  alternatives
to increase shredding capacity and reduce processing costs.

The Company  experienced  a fire at its waste fuel storage tank farm at Keystone
on December 8, 1997.  There were no injuries and no known  environmental  damage
and only minor damage to the  equipment.  As a result of the incident,  Keystone
burned  100%  coal for three  weeks in  December  and the  Company  incurred  an
after-tax  charge of $0.10 per share in the fourth  quarter.  Keystone  has made
equipment,  personnel and policy changes to ensure a similar  incident does not
occur in the future.
<PAGE>

Capital  expenditures  in  1997  were   $15.4  million  and   were   funded   by
internally-generated funds. Major projects completed include modest improvements
for two kilns and further automation of Giant's quarry operation. Recent capital
investment projects have yielded good results,  with both clinker production and
cement production increasing over the last three years. The Company continues to
focus on  improving  productivity  and lowering  costs.  The  Company's  capital
expenditures  and  process  improvements  have  contributed  to  improved  plant
efficiencies  and higher  cement kiln  utilization  rates.  Capital  spending of
approximately  $13 to $15 million is planned for 1998.  Capital spending at this
level should  allow the Company to add  incremental  capacity  and  consistently
replace equipment on an ongoing, as-needed basis.

We are very pleased with the 1997 performance of Keystone's aggregate operation.
Improvements in the plant and focus on operations  resulted in a 50% increase in
tonnage  produced at a considerably  lower cost per ton. The Company  expects to
produce and sell 750,000 tons of aggregate in 1998.

During  the year,  the  Company  reached a new  labor  agreement  with the union
employees at Giant.  The  three-year  contract  calls for annual wage  increases
averaging 3.2% per year. The contract with union  employees at Keystone  expires
April 30, 1998.  The Company  intends to reach a mutually  acceptable  agreement
with the bargaining unit.

One area of emphasis in 1997 was health and  safety.  Keystone  has now gone 504
days without a lost-time accident. However, we are focusing additional attention
on the Giant facility,  where lost-time  accidents actually increased during the
year.

Based upon industry  forecasts,  the outlook for the cement industry in 1998 and
perhaps for the next five years or more is very positive.  Demand is expected to
exceed  supply  at  least  through  2001.  The  Company  is well  positioned  to
capitalize on a strong  construction  market. With the strength of the Company's
balance sheet and financial  position,  the Company is positioned to continue to
enhance its capacity  through internal  investment,  enhance  shareholder  value
through share repurchases,  and to evaluate  appropriate  strategic  acquisition
opportunities.

<PAGE>


                           GIANT CEMENT HOLDING, INC.
                        CONSOLIDATED STATEMENTS OF INCOME



For the years ended December 31,       1997         1996          1995
                                       (In thousands, except per share data)
Revenues:

Product sales                         $100,988   $ 96,186       $ 86,635
Resource recovery services              15,900     14,012         13,550
                                      --------   --------       --------
     Total revenues                    116,888    110,198        100,185

Costs and expenses:

Cost of sales and services              81,756     77,818         72,871
Selling, general and administrative      7,523      7,841          7,547
Acquisition related expenses             1,200          -              -
                                      --------   --------       --------
     Operating income                   26,409     24,539         19,767

Other income (expense):

Interest expense                          (966)    (1,141)          (181)
Other, net                              (1,031)       298            (24)
                                      --------   --------       --------
     Income before income taxes         24,412     23,696         19,562
Provision for income taxes               8,327      8,275          6,847
                                      --------   --------       --------
     Net income                       $ 16,085   $ 15,421       $ 12,715
                                      ========   ========       ========

Earnings per common share:
     Basic                            $   1.70   $   1.57       $   1.27
                                      --------   --------       --------
     Diluted                          $   1.69   $   1.57       $   1.27
                                      --------   --------       --------
Weighted average common shares
    outstanding                          9,459      9,833          9,990


    See   accompanying   notes  to   consolidated   financial statements.



<PAGE>


                           GIANT CEMENT HOLDING, INC.
                           CONSOLIDATED BALANCE SHEETS

December 31,                                           1997           1996
                                                    (All amounts in thousands)
ASSETS
Current assets:
  Cash and cash equivalents                         $ 12,674       $ 10,432
  Accounts receivable, less allowances of $1,325
    in 1997 and $1,123 in 1996                        14,927         14,897
  Inventories                                         19,238         17,656
  Other current assets                                 3,652          2,071
                                                    --------       --------
    Total current assets                              50,491         45,056

Property, plant and equipment, net                    75,631         70,418
Deferred charges and other assets                      2,478          3,142
                                                    --------       --------
    Total assets                                    $128,600       $118,616
                                                    ========       ========

LIABILITIES
Current liabilities:
  Accounts payable                                  $ 11,567       $ 10,437
  Accrued expenses                                     8,258          6,843
  Current maturities of long-term debt                   888          1,070
                                                    --------       --------
    Total current liabilities                         20,713         18,350

Long-term debt, net of current maturities              9,661         10,681
Accrued pension and postretirement benefits            2,907          6,332
Deferred income taxes                                  7,674          6,125
                                                    --------       --------
    Total liabilities                                 40,955         41,488
                                                    --------       --------
Contingencies (Note 13)

SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value; 2.0 million
   shares authorized                                       -              -
Common stock, $.01 par value; 20.0 million shares
   authorized, 10.0 million shares issued                100            100
Capital in excess of par value                        41,317         41,022
Retained earnings                                     58,120         42,035
                                                    --------       --------
                                                      99,537         83,157
Less: Treasury stock, at cost; 675 shares in 1997,
        336 shares in 1996                            11,247          4,491
      Reduction for additional pension liability         645          1,538
                                                    --------       --------
      Total shareholders' equity                      87,645         77,128
                                                    --------       --------
      Total liabilities and shareholders' equity    $128,600       $118,616
                                                    ========       ========

     See accompanying notes to consolidated financial statements.


<PAGE>


                           GIANT CEMENT HOLDING, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31,                  1997       1996        1995
                                                  ----       ----        ----
                                                  (All amounts in thousands)
OPERATIONS:
Net income                                      $ 16,085   $ 15,421   $ 12,715
Depreciation and depletion                        10,189      9,031      7,855
Deferred income taxes                                609      1,023        876
Amortization of deferred charges and other           485        431        492
Changes in operating assets and liabilities:
  Receivables                                        (30)    (2,340)    (2,023)
  Inventories                                     (1,582)      (554)    (3,058)
  Other current assets and deferred charges       (2,810)    (1,291)    (1,303)
  Accounts payable                                 1,958      2,110        (41)
  Accrued expenses                                   656     (1,538)    (2,029)
                                                --------   --------   --------
   Net cash provided by operations                25,560     22,293     13,484
                                                --------   --------   --------
INVESTING:
Purchase of property, plant and equipment        (15,362)    (9,819)   (23,898)
                                                --------   --------   --------
   Net cash used by investing                    (15,362)    (9,819)   (23,898)
                                                --------   --------   --------
FINANCING:
Repayment of long-term debt                       (1,202)   (12,059)    (3,041)
Proceeds from long-term debt                           -      8,285      8,500
Proceeds from short-term borrowings                2,500      3,000      2,279
Repayment of short-term borrowings                (2,500)    (5,279)         -
Purchase of treasury shares                       (7,241)    (4,091)      (616)
Other                                                487          -       (201)
                                                --------   --------   --------
   Net cash provided (used) by financing          (7,956)   (10,144)     6,921
                                                --------   --------   --------
   Increase (decrease) in cash and cash
     equivalents                                   2,242      2,330     (3,493)
CASH AND CASH EQUIVALENTS:
Beginning of period                               10,432      8,102     11,595
                                                --------   --------   --------
End of period                                   $ 12,674   $ 10,432   $  8,102
                                                ========   ========   ========
SUPPLEMENTAL INFORMATION:
Cash paid for:
  Interest (net of capitalized interest of $0
   in 1997, $53 in 1996 and $733 in 1995)       $  1,003   $  1,141   $    186
  Income taxes                                     8,540      6,987      7,519
Non-cash investing and financing activities:
  Assets financed by notes and accounts payable    1,268      2,096      2,021
  Capital lease obligations                            -          -        599

        See accompanying notes to consolidated financial statements.


<PAGE>


                           GIANT CEMENT HOLDING, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                     Common Stock                                   Minimum
                                                   Capital in                       Pension
                                   Shares     Par  Excess of  Retained  Treasury   Liability
                                Outstanding  Value Par Value  Earnings    Stock    Adjustments    Total
                                                 (All amounts in thousands)
<S>                                 <C>      <C>    <C>       <C>        <C>      <C>           <C>

Balance, January 1, 1995            10,000   $100   $40,985   $13,899    $     -  $  (781)      $54,203
Net income for 1995                                            12,715                            12,715
Purchase of treasury shares            (63)                                 (616)                  (616)
Pension liability adjustments, net
  of $927 deferred income taxes                                                    (1,688)       (1,688)
                                     -----   ----   -------   -------   --------  -------       -------


Balance, December 31, 1995           9,937    100    40,985    26,614       (616)  (2,469)       64,614

Net income for 1996                                            15,421                            15,421
Issuance of treasury shares             22               37                  216                    253
Purchase of treasury shares           (295)                               (4,091)                (4,091)
Pension liability adjustments, net
  of $501 deferred income taxes                                                       931           931
                                     -----   ----   -------   -------   --------  -------       -------


Balance, December 31, 1996           9,664    100    41,022    42,035     (4,491)  (1,538)       77,128

Net income for 1997                                            16,085                            16,085
Exercise of employee stock options      35              130                  357                    487
Tax benefit of stock options                             84                                          84
Issuance of treasury shares             13               81                  128                    209
Purchase of treasury shares           (387)                               (7,241)                (7,241)
Pension liability adjustments, net
  of $481 deferred income taxes                                                       893           893
                                     -----   ----   -------   -------   --------  -------       -------
Balance, December 31, 1997           9,325   $100   $41,317   $58,120   $(11,247) $  (645)      $87,645
                                     =====   ====   =======   =======   ========  ========      =======


</TABLE>

        See accompanying  notes to  consolidated financial statements.


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation:

Giant Cement Holding, Inc. (the "Company") was previously an indirect subsidiary
of GIANT GROUP,  LTD.  ("GROUP"),  the Company's former parent. In October 1994,
GROUP  completed  the initial  public  offering of all 10 million  shares of the
Company's  common stock GROUP  previously  held. The  accompanying  consolidated
financial  statements  include  the  combined  financial  position,  results  of
operations and cash flows of Giant Cement  Company  ("Giant"),  Keystone  Cement
Company ("Keystone"),  and Giant Resource Recovery Company, Inc. ("GRR") for all
periods  presented.  Where  referred to herein,  the  "Company"  includes  these
subsidiaries.

2.   Significant Accounting Policies:

The Company is involved in a single business  segment  comprised of the domestic
manufacture and sale of portland and masonry  cements and related  aggregates in
the South-Atlantic and Middle-Atlantic regions of the United States. The Company
is also involved in waste recycling and resource recovery,  utilizing industrial
waste as supplemental fuels in its cement kilns.

Principles of Consolidation:
The consolidated financial statements include the financial position, results of
operations and cash flows of Giant Cement  Holding,  Inc. and its  subsidiaries,
which are wholly owned. All significant  intercompany  transactions and balances
have been eliminated.

Cash Equivalents:
For  purposes  of the  consolidated  statements  of cash  flows,  highly  liquid
securities with an original maturity date of three months or less are considered
cash  equivalents.  Cash equivalents are recorded at market value and consist of
short-term U.S. Government obligations and repurchase agreements  collateralized
by short-term U.S. Government obligations.

Inventories:
Inventories are carried at the lower of average cost or market.

Property, Plant and Equipment:
Property,   plant  and  equipment  are  stated  at  cost.   Major  renewals  and
improvements  are capitalized,  while  maintenance and repairs are expensed when
incurred.   Depreciation  is  computed  over  the  estimated   useful  lives  of
depreciable assets using the straight-line method.

         Useful lives for property and equipment are as follows:

                    Buildings and improvements             10 - 50 years
                    Machinery and equipment                 3 - 25 years
                    Office furniture and equipment          5 - 10 years

Depletion of the cost of quarry  property is based upon the tonnage  quarried in
relation to the estimated total tonnage available.
<PAGE>

Deferred Charges:
Deferred  charges  include debt  issuance  costs and certain  costs  incurred to
obtain  multi-year  operating  permits upon  certification  of  compliance  with
environmental  regulations.  Deferred permit  certification  costs are amortized
over the period benefited, presently three to ten years. Deferred loan costs are
amortized by the straight-line method over the life of the related debt.

Income Taxes:
Income taxes are accounted for in accordance with the provisions of Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes" ("SFAS
109").  Accordingly,  deferred tax assets or  liabilities  are  established  for
temporary  differences  between  financial  and  tax  reporting  bases  and  are
subsequently  adjusted to reflect  changes in tax rates expected to be in effect
when the temporary differences reverse.

Environmental Liabilities:
The Company evaluates environmental  contingencies and, if appropriate,  accrues
the estimated  cost by charging  income for the gross  liability for all matters
where a future loss is probable and reasonably estimable. If it is probable that
the Company will be  indemnified  and/or  recover all or a portion of a probable
loss,  and the amount of such  recovery  is  reasonably  estimable,  the Company
accrues the related  asset on a gross  basis.  The Company  utilizes  all of the
information  available  to it to  estimate  the  range or amount of loss and the
timing of loss payments.

Revenue Recognition:
The Company derives revenues from product sales and resource recovery  services.
Revenues  for cement sales are  recognized  in the period in which the cement is
shipped to customers.  Revenues for resource recovery services are recognized in
the  period  in which the  service  is  provided  or the  waste-derived  fuel is
utilized. Inventories of waste-derived fuel are immaterial.


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

3.  Inventories:

    At December 31:                       1997          1996
                                          ----          ----
                                              (In thousands)
    Finished goods                      $  4,131        $  3,141
    In process                             1,322           1,236
    Raw materials                          2,178           2,025
    Supplies, repair parts and coal       11,607          11,254
                                         -------         -------
                                        $ 19,238        $ 17,656
                                        ========        ========

<PAGE>


4.  Property, Plant and Equipment:

    At December 31 (at cost):             1997          1996
                                          ----          ----
                                               (In thousands)
    Land and quarries                   $  2,335        $  2,335
    Buildings                             11,025          10,772
    Machinery and equipment              152,736         139,008
    Projects in process                    1,981           3,655
                                        --------        --------
                                         168,077         155,770
    Less accumulated depreciation
      and depletion                       92,446          85,352
                                        --------        --------
                                        $ 75,631        $ 70,418
                                        ========        ========

5.  Accrued Expenses:

    At December 31:                       1997          1996
                                          ----          ----
                                              (In thousands)
    Compensation                        $  2,429        $  2,161
    Pension plan contributions             2,394           2,781
    Other                                  3,435           1,901
                                        --------        --------
                                        $  8,258        $  6,843
                                        ========        ========

6.  Debt:

Long-term debt consists of the
  following at December 31:               1997          1996
                                          ----          ----
                                              (In thousands)
Term loan                               $  2,048        $  2,705
Revolving credit facility borrowings       8,159           8,285
Other                                        342             761
                                        --------        --------
                                          10,549          11,751
Less current maturities                      888           1,070
                                        --------        --------
Long-term debt, net of current
  maturities                            $  9,661        $  10,681
                                        ========        =========

The Term Loan bears  interest at 8.4%  annually  and matures in 2000.  Property,
plant and  equipment  having an aggregate  net book value of $35.6  million have
been pledged as collateral under the Term Loan Agreement.

In December 1996, the Company entered into a three-year, annually renewable, $32
million  Revolving  Credit Facility and Letter of Credit  Agreement (the "Credit
Facility") with a bank.  Advances under the Credit Facility bear interest at the
lessor of LIBOR plus 1.75% or the bank's base rate minus 1.0%.  Borrowings under
the Credit Facility are partially collateralized by eligible accounts receivable
and  inventories  (as  defined).  The Company is required to reduce  outstanding
borrowings  under the Credit  Facility to $22.0  million for a period of 30 days
annually.  At December 31, 1997,  amounts  outstanding  and available  under the
Credit Facility totaled $8.2 million and $21.8 million, respectively.

The Company's Term Loan and Credit Facility impose  restrictions with respect to
the  maintenance  of  financial  ratios and net worth of the  Company.  The most
restrictive  covenants  currently  require  maintaining  tangible  net worth (as
defined) aggregating $60.0 million.

<PAGE>

Aggregate maturities of long-term debt are as follows:  1998 - $888,000,  1999 -
$920,000, 2000 - $8.7 million.

7.   Stock Option Plans:


The Company  has an  Employee  Stock  Option  Plan (the "Employee Plan"),  which
authorizes  the  Stock  Option  Committee  of the  Board of  Directors  to grant
incentive or  non-qualified  stock options for the purchase of up to 1.0 million
shares  of  common  stock to key  employees.  Additionally,  the  Company  has a
Directors Stock Option Plan for  non-employee  directors (the "Director  Plan"),
which provides for an initial grant of  non-qualified  options for 10,000 shares
of common  stock and  thereafter  an annual grant for 5,000  shares.  Options to
purchase up to 300,000  shares of Common Stock may be granted under the Director
Plan.  The  exercise  price under each stock  option plan is equal to the market
price at the date of grant,  and at December 31, 1997,  exercise  prices  ranged
from $11.88 to $18.00.

The following table  summarizes the changes in the number of shares under option
pursuant to the plans described above:
                                                                     Weighted
                                                                     Average
                                                          Number     Exercise
                                                        of Shares     Price
Outstanding at December 31, 1994 (102,000 exercisable)   292,000     $14.00
      Granted                                             15,000      13.25
      Canceled                                             6,000      14.00
                                                         -------     ------
Outstanding at December 31, 1995 (207,000 exercisable)   301,000      13.96
      Granted                                             71,000      12.24
      Canceled                                             5,000      14.00
                                                         -------     ------
Outstanding at December 31, 1996 (332,000 exercisable)   367,000      13.63
      Granted                                            126,000      16.30
      Exercised                                           35,000      13.85
      Canceled                                             1,000      11.88
                                                         -------     ------
Outstanding at December 31, 1997 (390,000 exercisable)   457,000     $14.35
                                                         =======     ======

As permitted by Statement of Financial Accounting Standards No. 123, "Accounting
For Stock-Based  Compensation" ("SFAS 123"), the Company has chosen to apply APB
Opinion No. 25 and related  interpretations  in accounting  for its stock option
plans. Accordingly, no compensation cost has been recognized for options granted
under the plans.  Had  compensation  cost for the plans been determined based on
the fair value at the grant  dates for awards  under the plans  consistent  with
SFAS 123, the pro forma impact on the  Company's net income and basic net income
per share would be as follows:

                                        1997        1996       1995
                                        ----        ----       ----
Net earnings - as reported             $16,085    $15,421     $12,715
Net earnings - pro forma                15,759     15,304      12,691
Basic earnings per share - as reported    1.70       1.57        1.27
Basic earnings per share - pro forma      1.67       1.56        1.27

In  accordance  with SFAS 123, the fair value  approach to valuing stock options
used for pro forma  presentation  has not been applied to stock options  granted
prior to January 1, 1995. The compensation  cost calculated under the fair value
approach is recognized over the vesting period of the stock options.


<PAGE>


8.   Income Taxes:

The provision (credit) for income taxes is comprised of the following:

                                    1997          1996         1995
                                    ----          ----         ----
                                            (In thousands)
    Current:       Federal        $  7,838      $  6,951     $  5,391
                   State               317           761          982
    Deferred:      Federal             107           847          495
                   State                65          (284)         (21)
                                  --------      --------     --------
                                  $  8,327      $  8,275     $  6,847
                                  ========      ========     ========

The following is a  reconciliation  between the federal  income tax rate and the
Company's effective income tax rate:

                                     1997           1996           1995
                                     ----           ----           ----
    Statutory tax rate               35.0%          35.0%          35.0%
    State income taxes, net of
      federal benefit                 1.5            1.3            3.2
    Excess depletion for tax
      purposes                       (2.9)          (2.8)          (3.5)
    Other, net                         .5            1.4             .3
                                     ----           ----           ----
    Effective rate                   34.1%          34.9%          35.0%
                                     ====           ====           ====

Cumulative gross deferred tax assets and liabilities  relate to the following at
December 31:

                                                1997              1996
                                                ----              ----
                                                     (In thousands)
    Pension and postretirement benefits       $1,080             $2,130
    Allowances for discounts and doubtful
          accounts and other liabilities       1,615                993
    Other                                        223                189
                                              ------             ------
          Gross deferred tax assets            2,918              3,312
                                              ------             ------
    Depreciation                               7,634              7,363
    Other                                      1,672              1,246
                                              ------             ------
          Gross deferred tax liabilities       9,306              8,609
                                              ------             ------
          Net deferred tax liability           6,388              5,297
    Deferred tax asset-current                 1,286                828
                                              ------             ------
    Deferred tax liability non-current        $7,674             $6,125
                                              ======             ======


<PAGE>


9.   Pension Plans:

The Company maintains noncontributory, defined benefit pension plans which cover
substantially  all  employees.  The  Company's  policy  is to fund at least  the
minimum required by applicable  regulations.  Plan assets consist principally of
listed stocks and bonds and commingled stock and bond funds.

                                             Over-Funded      Under-Funded
                                               Plans             Plans
                                                1997        1997         1996
                                                ----        ----         ----
                                                          (In thousands)
Actuarial present value of benefit obligations:
      Vested                                   $20,882    $12,540      $32,784
      Nonvested                                    520        116          449
                                               -------    -------      -------
Accumulated benefit obligation                  21,402     12,656       33,233
Effect of future compensation increases              -        757          608
                                               -------    -------      -------
Projected benefit obligation                    21,402     13,413       33,841
Plan assets, at fair value                      23,572     10,223       27,852
                                               -------    -------      -------
Plan assets in excess of (less than)
      projected benefit obligation               2,170     (3,190)      (5,989)
Unrecognized net transition asset                 (202)      (153)        (411)
Unrecognized prior service cost                    641        595        1,335
Unrecognized net (gain) loss                      (979)     1,610        3,444
Adjustment required to recognize additional
      minimum liability*                             -     (1,295)      (3,753)
                                               -------    -------      -------
Prepaid (accrued) pension expense              $ 1,630    $(2,433)     $(5,374)
                                               =======    =======      =======

*  An  intangible  asset of  $303,000  in 1997 and  $1.4  million  in 1996 and a
   reduction  of equity (net of deferred  income  taxes) of $645,000 in 1997 and
   $1.5  million  in 1996 were  recognized  to  record  the  additional  pension
   liability.

    Pension  expense for the defined benefit plans includes the
    following:                                  1997        1996         1995
                                                ----        ----         ----
                                                       (In thousands)
Benefits earned during the year (service cost) $   518    $   500      $   405
Interest cost on projected benefit obligation    2,448      2,433        2,501
Actual return on plan assets                    (6,562)    (2,863)      (3,498)
Net amortization and deferral                    4,249        717        1,474
                                               -------    -------      -------
         Total                                 $   653    $   787      $   882
                                               =======    =======      =======

The assumed  discount  rates,  long-term  rates of return on assets and rates of
increase for future compensation were 7.25%, 9.25% and 4.5%,  respectively,  for
1997;  and were 7.5%,  9.25% and 4.5%,  respectively,  for 1996; and were 7.25%,
9.5% and 5.0%, respectively, for 1995.

The  Company  also  maintains  tax  deferred  profit-sharing  plans for  certain
eligible  employee groups.  Expenses related to the plans,  which are based upon
pre-tax income of the cement and resource recovery operations, were $656,000 for
1997, $612,000 for 1996 and $500,000 for 1995.


<PAGE>


10.  Postretirement Health Benefits:

Postretirement  medical and life  insurance  is provided  to  substantially  all
employees.  The Company  accrues these  benefits  over an employee's  employment
career.  The Company funds these costs as incurred which totaled $1.1 million in
both 1997 and 1996, and $1.4 million in 1995.

Postretirement medical and life insurance expense includes
the following:                                     1997     1996        1995
                                                   ----     ----        ----
                                                       (In thousands)
Service cost                                     $  285    $  261    $   266
Interest cost                                       981       991      1,222
Amortization of items not previously recognized:
  Transition obligation                             577       577        604
  Net actuarial losses                                -         8         31
                                                 ------    ------     ------
                                                 $1,843    $1,837     $2,123
                                                 ======    ======     ======

The  following  sets forth the  accumulated  postretirement  benefit  obligation
("APBO") applicable to each employee group and amounts included in the Company's
December 31 balance sheet:

                                                    1997           1996
                                                    ----           ----
                                                       (In thousands)
Accumulated postretirement benefit obligations:
   Retired employees                             $  9,972        $11,453
   Active employees - fully eligible                1,342          1,208
   Active employees - not yet eligible              2,912          2,681
                                                 --------        -------
Total APBO                                         14,226         15,342
Unrecognized transition obligation                 (8,657)        (9,233)
Unrecognized net loss                              (1,129)        (2,370)
                                                 --------        -------
Accrued postretirement benefits                  $  4,440        $ 3,739
                                                 ========        =======

The discount rates used in  determining  the APBO were 7.25% in 1997 and 7.5% in
1996. The  obligation is unfunded.  The assumed health care cost trend rate used
in  measuring  the  APBO  as of  December  31,  1997  and  1996  was 8% and  9%,
respectively,  declining to a rate of 5% in 2001.  Increasing  the assumed trend
rate for health care costs by one  percentage  point would result in an increase
to the APBO at December  31, 1997 of $1.4 million and an increase to the related
expense for 1997 of $155,000.

11.  Leases:

The Company leases office space,  warehouse  space and equipment under operating
leases  which have  remaining  terms of up to five years.  The leases  generally
include renewal options.  Total rental expense for the years 1997, 1996 and 1995
amounted to $2.4 million, $2.2 million and $1.9 million, respectively.

<PAGE>


Future minimum rental  commitments under  noncancelable  leases with a remaining
term  in  excess  of one  year  as of  December  31,  1997  are as  follows  (in
thousands):
                                    1998               $1,241
                                    1999                  843
                                    2000                  558
                                    2001                  445
                                    2002                  250
                                                       ------
                                                       $3,337

12.  Treasury Stock:

In October 1997, the Company's  Board of Directors  approved a plan to expend up
to $5.0 million for the repurchase of shares of the Company's outstanding common
stock  over an  18-month  period.  During  1995,  1996  and  1997,  the  Company
repurchased 745,000 shares of its common stock at a cost of $11.9 million.

13.  Contingencies:

The Company's  operations  and  properties are subject to extensive and changing
federal, state and local laws (including common law), regulations and ordinances
relating to noise and dust suppression, air and water quality, as well as to the
handling,  treatment,  storage and disposal of wastes ("Environmental Laws"). In
connection  with  the  Company's  quarry  sites  and  utilization  of  hazardous
waste-derived  fuel,  Environmental  Laws  require  certain  permits  and  other
authorizations  mandating  procedures  under  which the Company  shall  operate.
Environmental Laws also provide significant penalties for violators,  as well as
liabilities  and costs of  cleaning up  releases  of  hazardous  wastes into the
environment.  Violations of mandated procedures under operating permits, even if
immaterial or unintentional, may result in fines, shutdowns, remedial actions or
revocation of such  permits,  the loss of any one of which could have a material
adverse effect on the Company's results of operations.

In December 1997, the resource recovery  operation at Keystone Cement Company, a
wholly-owned subsidiary of Giant Cement Holding, Inc., experienced a fire at its
waste fuel storage tank farm. There were no injuries and no known  environmental
damage. Only very minimal damage to equipment at the plant occurred. Keystone is
in the  process  of  negotiating  a  consent  agreement  with  the  Pennsylvania
Department of Environmental  Protection to allow it to resume waste fuel burning
and resolve all outstanding alleged violations of environmental statutes.  Other
expense in the fourth  quarter of 1997 includes  pretax  charges of $1.4 million
for the estimated costs related to this incident.

14.  Pending Acquisition:

In September  1997,  the Company  entered  into a definitive  agreement to merge
Solite  Corporation and certain of its  subsidiaries  with Giant Cement Holding,
Inc. On March 2, 1998,  the Definitive  Merger  Agreement was amended to reflect
the increased value of the Company's common stock and the increased  transaction
costs associated with the Department of Justice review.  The Solite  transaction
will include three  lightweight  aggregate  manufacturing  facilities with their
associated resource recovery operations, five concrete block plants, and a waste
treatment  and blending  facility.  Giant will  exchange  325,000  shares of its
common  stock  for all of the  outstanding  stock of  Solite.  The  terms of the
transaction  additionally  include  the  assumption  of up to $20.0  million  of
Solite's  long-term  debt. Pro Forma  unaudited  combined  revenues for the year
ended December 31, 1997, as if the merger had occurred on January 1, 1997,  were
approximately $169.0 million.
<PAGE>

The Company and Solite have received second  requests for  information  from the
United States Department of Justice,  Antitrust  Division  (USDOJ),  relating to
their  Premerger  Notification  filings  under the  Hart-Scott-Rodino  Antitrust
Improvements  Act. On March 23,  1998,  the USDOJ  indicated  it will oppose the
merger unless Solite  retains an investment  banking firm and attempts to market
the assets that the Company is acquiring  to other  potential  purchasers.  As a
result of the uncertainty of the Company's  ability to obtain clearance from the
USDOJ to  consummate  the  merger,  the Company has elected to expense the costs
incurred in connection with the acquisition, which would normally be capitalized
and  accounted  for as a portion of the  acquisition  cost.  Acquisition  costs,
totaling  $1.2  million or $.08 per share after tax,  were  charged to operating
expenses in the fourth quarter.

15.  Earnings Per Share:

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which
established  new  standards  for  computing  and  presenting  earnings per share
information.  As required, the Company adopted the provisions of SFAS 128 in its
year-end 1997 financial  statements and has restated all prior-year earnings per
share  information.  Basic earnings per share of common stock were determined by
dividing net income  applicable to common shares by the weighted  average number
of common  shares  outstanding  during  each year.  Diluted  earnings  per share
reflect the potential  dilution that could occur assuming exercise of all issued
and unexercised stock options. A reconciliation of the net income and numbers of
shares used in computing basic and diluted earnings per share is as follows:

                                                  1997        1996       1995
                                          (In thousands, except per share data)
Basic earnings per share:
Net income                                       $ 16,085   $ 15,421   $ 12,715
Weighted average common shares outstanding for
  the year                                          9,459      9,833      9,990
                                                 --------   --------   --------

Basic earnings per share of common stock         $   1.70   $   1.57   $   1.27
                                                 ========   ========   ========

Diluted earnings per share:
Net income                                       $ 16,085   $ 15,421   $ 12,715
                                                 --------   --------   --------
Weighted average common shares outstanding for
  the year                                          9,459      9,833      9,990
Increase in shares which would result from:
  Exercise of stock options *                          83          -          -
                                                 --------   --------   --------
Weighted average common shares, assuming
  conversion of the above securities                9,542      9,833      9,990
                                                 --------   --------   --------

Diluted earnings per share of common stock       $   1.69   $   1.57   $   1.27
                                                 ========   ========   ========

*Antidilutive in 1995 and 1996.


<PAGE>


                        Report of Independent Accountants


Board of Directors and Shareholders
 GIANT CEMENT HOLDING, INC.

We have audited the  accompanying  consolidated  balance  sheets of Giant Cement
Holding,  Inc. (the "Company") as of December 31, 1997 and 1996, and the related
consolidated statements of income,  shareholders' equity and cash flows for each
of the three  years in the period  ended  December  31,  1997.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position of Giant Cement
Holding,  Inc. as of December 31, 1997 and 1996, and the consolidated results of
its  operations  and its cash  flows for each of the three  years in the  period
ended  December  31,  1997 in  conformity  with  generally  accepted  accounting
principles.



Coopers & Lybrand L.L.P.



Charlotte, North Carolina
February 5, 1998 except as to Note 14,
    for which the date is March 23, 1998


<PAGE>


Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

General

The  Company's  cement  operations  are  directly  related  to the  construction
industry.   The   regional   markets  in  which  the   Company   operates,   the
Middle-Atlantic and South-Atlantic  regions,  are highly cyclical,  experiencing
peaks and valleys in demand corresponding to regional and national  construction
cycles.  Additionally,  the demand for cement is seasonal  because  construction
activity diminishes during the winter months of December, January, and February.
The seasonal impact can be particularly  acute in the Company's  Middle-Atlantic
market. In addition,  the Company performs a substantial  portion of its routine
annual major  maintenance  projects during the period of low plant  utilization,
typically  the first quarter of its fiscal year,  which  results in  significant
additional  expense  during this period.  The Company  believes that the routine
annual  maintenance  performed in the first quarter results in lower maintenance
costs  throughout  the  remainder  of the year.  Accordingly,  the  Company  has
historically  experienced  its lowest  levels of revenue and gross profit during
the first quarter.

The Company derives  revenues from the sales of products,  primarily  cement and
construction  aggregates,  as well as from the  provision  of resource  recovery
services.  Resource  recovery  services revenue is primarily  derived from third
parties that pay the Company to utilize their waste as fuel, which  additionally
reduces the cost of traditional  fossil fuels used in the manufacture of cement.
Due to the nature of the Company's  operations  and the fact that the burning of
waste-derived  fuels  is  inseparable  from the  manufacture  of  cement,  it is
impractical  to  disaggregate  the  costs  of  sales  and  services  by  revenue
classification.  The Company's  resource  recovery  operations  are dependent on
general  and  regional   economic   conditions;   federal,   state,   and  local
environmental policies; and competition from other waste disposal alternatives.

Cement is a commodity product sold primarily on the basis of price. The price of
cement  tends to rise in periods of high  demand and can fall if supply  exceeds
demand. The economic recovery that began in 1993 resulted in improved demand and
increased  pricing for the  Company's  products.  Demand for cement has exceeded
available supplies in the Company's South-Atlantic market at various times since
1993, causing cement shortages.  Demand in the Company's  Middle-Atlantic market
has been good for most of the past three years. In 1995, the Company  realized a
price increase of $6 per ton in its Middle-Atlantic  market and a price increase
of $8 per ton in its  South-Atlantic  market. In 1996, the Company realized a $4
per ton price  increase  in its  South-Atlantic  market.  In 1997,  the  Company
realized a $4 per ton increase in its Middle-Atlantic market. Effective April 1,
1998,  the Company has  announced a $4 per ton  increase in its  Middle-Atlantic
market; and a $3 per ton increase in its South-Atlantic  market,  although there
can be no assurance that these price  increases will be realized or that current
price  levels  will not  decline  should  cement  demand  decline in relation to
supply.

The Company's  cement  manufacturing,  hourly  employees are  represented by the
United  Paperworkers  International  Union  ("UPIU").  During 1997,  the Company
reached a new three-year  labor  agreement  with the hourly  employees at Giant,
granting  annual wage increases  averaging 3.2% per year. The Agreement  between
Keystone  Cement Company and UPIU Local 10547 expires April 30, 1998.  While the
Company will endeavor to negotiate a new agreement  with the UPIU,  there can be
no  assurance  that an  agreement  will be  reached  on terms  favorable  to the
Company,  nor can  there be  assurance  that the  Company  will not  incur  work
stoppages, slowdowns or a strike.
 <PAGE>


The Company is in the initial stages of addressing  year 2000 computer  software
and operating system issues.  The Company is using a combination of internal and
external  resources  to assess the needed  changes  to its  various  information
systems. At present, the Company does not have an estimate of the total costs of
evaluating and  correcting any potential  problems and is unable to determine if
such expenses  will be material.  The costs  associated  with  addressing  these
issues will be expensed as incurred.

Financial  Accounting  Standards  Board  Statement  No. 131,  "Disclosure  About
Segments of an Enterprise and Related  Information"  ("SFAS 131"),  is effective
for the year ended December 31, 1998. The  implementation  of this standard will
not have a material impact on the Company's financial statements.  In accordance
with SFAS 131, the Company will continue to report a single business segment.

Results of Operations
1997 Versus 1996

Total  operating  revenues  increased  $6.7 million or 6.1% to $116.9 million in
1997, compared with $110.2 million in 1996. Product sales increased $4.8 million
or 5.0% to $101.0  million in 1997,  compared  with $96.2  million in 1996.  The
increase  resulted  primarily  from an increase in the average  selling price of
cement and increased  aggregate sales.  Cement shipping volumes increased .6% in
1997 compared with 1996 volumes.  The Company's average selling price per ton of
cement  increased  3.4% in 1997, as a result of price  increases  implemented in
April 1996 and 1997.  The  Company  realized a price  increase  of $4 per ton in
April 1997 in its Middle-Atlantic  market.  Resource recovery revenues increased
$1.9 million or 13.5% to $15.9  million in 1997,  compared with $14.0 million in
1996, as a result of higher  volumes and pricing of both liquid and solid fuels.
Liquid fuels utilized  increased 6.7%,  while liquids pricing improved 5.9%. The
Company's solid fuels volume increased 17.6%, while solid fuels pricing improved
5.7%.

Improved  cement  pricing  and  resource  recovery  revenues  resulted in a $2.7
million or 8.5%  increase in gross  profit  from $32.4  million in 1996 to $35.1
million in 1997. The Company's gross margin  percentage  increased from 29.4% in
1996 to 30.1% in 1997.  The total  cost of sales  and  services  increased  $4.0
million to $81.8  million,  compared  with $77.8  million in 1996.  The  largest
component of the increase in cost was increased depreciation expense from recent
capital  improvements.  Cement costs per ton increased 1.1% in 1997. Clinker and
cement manufactured increased 1.2% and 3.3%,  respectively,  compared with 1996,
as a result of capital and operating improvements made in 1996 and 1997. Both of
the Company's plants have operated at effective capacity throughout 1997.

Selling, general and administrative expenses decreased $318,000 to $7.5 million,
and  decreased to 6.4% of operating  revenues.  The expense  decrease  primarily
related to lower administrative costs.

Acquisition  related expenses of $1.2 million were charged to expense in 1997 as
a result of the  uncertainty of the Company's  ability to obtain  clearance from
the USDOJ to consummate the Solite acquisition (See note 14).

Prior to acquisition related expenses, operating income improved $3.1 million or
12.5% to $27.6 million in 1997,  compared with $24.5 million in 1996,  primarily
as the  result of the  increase  in  operating  revenues.  Prior to  acquisition
related expenses,  operating income margins improved from 22.3% in 1996 to 23.6%
in  1997.  The  1997  results  of  operations  were  impacted  by the  Company's
suspension of the  utilization  of waste fuels at Keystone for most of the month
of December as a result of a fire at  Keystone's  waste fuel  storage tank farm.
<PAGE>

Keystone's  inability  to utilize  waste  fuels  resulted in lost  revenues  and
additional  costs of  approximately  $450,000  in the  quarter or $.03 per share
after tax.

Interest expense  decreased  $175,000  as a  result  of lower average borrowings
outstanding.  Other  expense in 1997  includes  pre-tax  charges of $1.4 million
relating  to  Keystone's  tank farm  fire and its  resulting  suspension  of the
utilization of waste fuel. (See  Environmental  Matters).

Federal and state income tax expenses resulted in an effective tax rate of 34.9%
in 1996 and 34.1% in 1997. The Company's  effective tax rate of 34.1% in 1997 is
not expected to change materially under current tax law.

Net income  increased  $700,000 or 4.3% to $16.1 million in 1997,  compared with
$15.4 million in 1996.

Results of Operations
1996 Versus 1995

Total operating  revenues  increased $10.0 million or 10.0% to $110.2 million in
1996, compared with $100.2 million in 1995. Product sales increased $9.6 million
or 11.0% to $96.2  million in 1996,  compared  with $86.6  million in 1995, as a
result of  increased  shipping  volumes  and higher  average  selling  prices of
cement.  Cement shipping  volumes  increased 6.7% in 1996, as a result of volume
increases in both of the Company's market areas.  The Company's  average selling
price per ton of cement  increased 4.1% in 1996, as a result of price  increases
in its South-Atlantic  market. No price increases were realized in the Company's
Middle-Atlantic market in 1996. Resource recovery revenues increased $462,000 or
3.4% to $14.0 million in 1996, compared with $13.6 million in 1995, primarily as
a result of a 124.2%  increase  in the  volume of solid  waste  fuels  utilized,
partially  offset by lower liquid fuels pricing.  Liquid fuel volumes  increased
3.8%; however, average liquid fuel pricing decreased 16.1% in 1996 compared with
1995.

Improved shipping volumes and cement pricing resulted in a $5.1 million or 18.5%
increase in gross  profit from $27.3  million in 1995 to $32.4  million in 1996.
The Company's gross margin  percentage  increased from 27.3% in 1995 to 29.4% in
1996.  The total  cost of sales and  services  increased  $4.9  million to $77.8
million  primarily  as  a  result  of  higher  shipping  volumes  and  increased
depreciation  expense.  Cement costs per ton increased  less than one percent in
1996.  Clinker and cement  manufactured  increased 1.5% and 2.5%,  respectively,
compared with 1995, as a result of capital and  operating  improvements  made in
1995 and 1996. Both of the Company's plants have operated at effective  capacity
throughout 1996.

Selling, general and administrative expenses increased $294,000 to $7.8 million,
but decreased to 7.1% of operating revenues as a result of higher revenues.  The
increase related primarily to higher selling and promotional expenses.

Operating  income  improved  $4.8  million  or 24.1% to $24.5  million  in 1996,
compared with $19.8 million in 1995,  primarily as the result of the increase in
operating  revenues.  Operating  income  margins  improved from 19.7% in 1995 to
22.3% in 1996, as a result of higher cement selling prices with only minimal per
unit cost increases.

Interest expense increased $1.0 million as a result of higher average borrowings
outstanding and the capitalization of $733,000 of interest cost in 1995.

Federal and state income tax expenses resulted in an effective tax rate of 35.0%
<PAGE>

in 1995 and 34.9% in 1996. The Company's  effective tax rate of 34.9% in 1996 is
not expected to change materially under current tax law.

Net income  increased  $2.7 million or 21.3% to $15.4 million in 1996,  compared
with $12.7 million in 1995.  Net income as a percentage  of net sales  increased
from 12.7% in 1995 to 14.0% in 1996.

Liquidity and Capital Resources

The Company's liquidity requirements arise primarily from the funding of capital
expenditures,  debt service  obligations and working capital needs.  The Company
has  historically  met  these  needs  through  internal  generation  of cash and
borrowings  on  revolving  credit  facilities.  The  Company's  borrowings  have
historically  increased  during  the  first  half  of the  year  because  of the
seasonality  of its business and the annual plant  maintenance  performed in the
first quarter.

Cash and cash equivalents  totaled $12.7 million at December 31, 1997,  compared
with $10.4  million at December  31, 1996.  At December  31, 1997 and 1996,  the
Company had working  capital of $29.8  million and $26.7  million with a current
ratio of 2.4 and 2.5,  respectively.  Accounts  receivable  increased $30,000 or
less than 1% compared with 1996.  Inventories  increased $1.6 million or 9.0% to
$19.2  million at December  31,  1997,  primarily  as a result of an increase in
finished  cement  and  repair  parts  inventories.   Total  current  liabilities
increased $2.4 million or 12.9% to $20.7 million in 1997,  primarily as a result
of higher trade accounts payable and accrued expenses.

Net cash provided by operations increased $3.3 million or 14.7% to $25.6 million
in 1997,  compared  with  $22.3  million in 1996,  primarily  as a result of the
Company's  improved  earnings,  increased  depreciation and a lesser increase in
accounts  receivable.  Net cash used by investing  increased to $15.4 million in
1997,  compared  with $9.8  million in 1996,  as a result of  increased  capital
expenditures. Net cash used by financing activities decreased to $8.0 million in
1997,  compared with $10.1  million in 1996,  primarily as a result of less debt
repayment, partially offset by greater treasury share repurchases.

The Company has  entered  into a  three-year,  annually  renewable,  $32 million
Revolving  Credit  Facility and Letter of Credit  Agreement.  Advances under the
Credit  Facility  bear  interest at the lesser of LIBOR plus 1.75% or the bank's
base rate  minus  1.0%.  Borrowings  under the  Credit  Facility  are  partially
collateralized by eligible accounts receivable and inventories (as defined). The
Company is required to reduce  outstanding  borrowings under the Credit Facility
to $22.0 million for a period of 30 days annually. At December 31, 1997, amounts
outstanding  and available  under the Credit  Facility  totaled $8.2 million and
$21.8 million, respectively.

The Company  anticipates that its capital  expenditures for plant and equipment,
including certain environmental  compliance capital expenditures,  will be $13.0
to $15.0  million in 1998.  In addition  to the  Company's  capital  expenditure
programs,  the Company expends  substantial  resources on maintenance  annually.
These costs are expensed as incurred and were $12.2  million,  $13.9 million and
$14.9 million for 1995,  1996 and 1997,  respectively.  While a portion of these
costs is discretionary,  the Company  anticipates that maintenance  expenditures
will continue at or near these levels.

In September  1997, the Company  entered into a definitive  agreement to acquire
certain   lightweight   aggregate  and  concrete  block   facilities  of  Solite
<PAGE>

Corporation,  located  principally  in the  South-Atlantic  United  States.  The
definitive  agreement has since been renegotiated to reflect the increased value
of the Company's  common stock and the increased  transaction  costs  associated
with the  Department of Justice  review.  The  acquisition  is subject to, among
other matters,  approvals by various regulatory authorities.  If completed, (See
note 14)the acquisition (which will be accounted for as a purchase) will require
approximately  $28 million to be financed  through the issuance of approximately
325,000  common shares and bank  borrowings of  approximately  $20 million.  The
Company  intends to utilize a combination of new term financing and its existing
Credit Facility to finance the $20 million.

At December 31, 1997,  three of the Company's  defined benefit pension plans had
projected  benefit  obligations of $3.2 million in excess of plan assets,  while
one of the Company's plans had assets in excess of projected benefit obligations
of $2.2 million.  The Company intends to fund the excess benefit obligation from
time to time as funds  are  available.  Additionally,  under the  provisions  of
Statement of Financial Accounting Standards No. 106, "Employer's  Accounting for
Postretirement   Benefits  Other  Than   Pensions,"   the  Company's   projected
accumulated  postretirement benefit obligation totaled $14.2 million at December
31, 1997, of which $4.4 million was accrued.  The Company  funds  postretirement
benefits as the claims are incurred and anticipates continuing to do so.

Environmental Matters

The Company's  operations  and  properties are subject to extensive and changing
federal, state and local laws (including common law), regulations and ordinances
relating to noise and dust suppression, air and water quality, as well as to the
handling,  treatment,  storage and disposal of wastes ("Environmental Laws"). In
connection  with  the  Company's  quarry  sites  and  utilization  of  hazardous
waste-derived  fuel,  Environmental  Laws  require  certain  permits  and  other
authorizations  mandating  procedures  under  which the Company  shall  operate.
Environmental Laws also provide significant penalties for violators,  as well as
liabilities  and costs of  cleaning up  releases  of  hazardous  wastes into the
environment.  Violations of the permit conditions or of the regulations, even if
immaterial or unintentional, may result in fines, shutdowns, remedial actions or
revocation  of the  permits,  the loss of any one of which could have a material
adverse effect on the Company's financial condition or results of operations. In
1997,  resource  recovery  services  revenues  totaled $15.9 million or 13.6% of
consolidated revenues.

While the Company  endeavors to maintain full compliance with the  environmental
laws and  regulations  at all times,  violations  have  occurred in the past and
there is no  assurance  violations  will not  occur  in the  future,  due to the
inherent  complexity and differing  interpretations of the laws and regulations.
The Company  maintains  environmental  liability  insurance  with limits of $5.0
million per occurrence and $10.0 million annual  aggregate at each of its cement
manufacturing  facilities.  These policies cover certain off-site  environmental
damage.  The policies do not cover  liabilities  arising under CERCLA,  fines or
penalties, and thus the Company has no claims for recovery of these items.

On December 8, 1997, the resource recovery operation at Keystone Cement Company,
a wholly-owned  subsidiary of Giant Cement Holding,  Inc., experienced a fire at
its  waste  fuel  storage  tank  farm.  There  were  no  injuries  and no  known
environmental  damage.  Only  very  minimal  damage  to  equipment  at the plant
occurred.

Immediately after the incident,  Keystone ceased  utilization of waste fuels and
later  entered  into a  negotiated  consent  agreement  with the  Department  of
Environmental  Protection  (DEP) of the State of Pennsylvania to halt the use of
<PAGE>

waste fuels at its plant pending an investigation of the cause and determination
of the appropriate corrective actions to ensure that a similar incident does not
occur in the future. A report on the findings and recommended corrective actions
was submitted to the DEP on December 31, 1997.  Management  has  estimated  that
costs  relating to this matter will total $1.4  million,  which costs were fully
accrued at  December  31,  1997.  Keystone is in the  process of  negotiating  a
further consent  agreement with the DEP to allow it to resume waste fuel burning
and resolve all outstanding  alleged violations of environmental  statutes.  The
Company  believes  the  interruption  of its waste fuel  business  is covered by
insurance;  however,  no amounts have been  recorded for this  recovery  pending
further evaluation of the claim and the ability to estimate the amounts, if any,
that may be recovered.


Disclosure Regarding Forward Looking Statements

This report contains certain  forward-looking  statements,  containing the words
"believes,"  "anticipates,"  "expects," and words of similar import,  based upon
current  expectations  that involve a number of known and unknown business risks
and  uncertainties.  The factors that could cause  results to differ  materially
include the following: national and regional economic conditions, changes in the
levels of construction spending, changes in supply or pricing of waste fuels and
other risks as further  described in the  Company's  Annual  Report on Form 10-K
filed with the SEC for the year ended December 31, 1997.


<PAGE>


                              CORPORATE INFORMATION

Quarterly Results of Operations
(Unaudited; amounts in thousands, except per share data)

                                             Quarter Ended
1997                             March 31   June 30    Sept. 30      Dec. 31
----                             --------   -------    --------      -------
Operating revenues              $24,358     $32,323    $31,672      $28,535
Gross profit                      4,063      10,734     10,957        9,378
Operating income                  2,040       8,839      9,112        6,418
Net income                        1,238       5,694      5,888        3,265*
Earnings per common share:
   Basic                        $   .13     $   .60    $   .63      $   .35
   Diluted                      $   .13     $   .60    $   .62      $   .34

1996
Operating revenues              $20,791     $32,414    $29,335      $27,658
Gross profit                      4,010       9,923      9,699        8,748
Operating income                  1,876       7,841      7,879        6,943
Net income                          986       4,913      5,098        4,424
Earnings per common share:
   Basic                        $   .10     $   .50    $   .52      $   .46
   Diluted                      $   .10     $   .50    $   .52      $   .46

   * Includes special charges of $1.7 million or $.18 per share.

Market and Dividend Information

The Company's  common stock is traded on the Nasdaq  National Market tier of The
Nasdaq Stock Market under the symbol:  GCHI. On March 5, 1998,  the  approximate
number of  registered  holders  of the  Company's  common  stock was 113 and the
approximate number of beneficial  shareholders was 3,000. The high and low price
of the Company's common stock during the calendar  quarters of 1996 and 1997 are
set forth below. The closing price on December 31, 1997 was $23.13.  The Company
expects that earnings will be retained in the  business,  and no cash  dividends
will be paid to its common shareholders for the foreseeable future.

Calendar Quarter           1997                               1996
                           ----                               ----
                   High             Low              High               Low
First             $17.13           $15.25           $12.75             $10.44

Second            $18.75           $15.50           $14.63             $12.38

Third             $24.63           $18.13           $16.38             $12.63

Fourth            $25.75           $22.00           $16.13             $14.75


<PAGE>


Corporate Information                   Form 10-K and Company Information
Corporate Offices                       A copy of Giant Cement Holding, Inc.'s
320-D Midland Parkway                   Annual Report on Form 10-K for the year
Summerville, South Carolina 29485       ended December 31, 1997, filed with the
(843) 851-9898                          Securities and Exchange Commission, may
                                        be obtained by writing Terry L. Kinder,
                                        Vice President and Chief Financial
                                        Officer, at the corporate address.

Auditors                                Annual Meeting
Coopers & Lybrand L.L.P.                The Annual Meeting of Shareholders for
Charlotte, North Carolina               Giant Cement Holding, Inc. will be held
                                        May 12, 1998, in New York, New York.

Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016



<PAGE>


                           GIANT CEMENT HOLDING, INC.
                             DIRECTORS AND OFFICERS

                                    DIRECTORS

                                  Gary Pechota
                             Chairman of the Board,
              President and Chief Executive Officer of the Company

                                 Terry L. Kinder
                    Vice President, Chief Financial Officer,
                     Secretary and Treasurer of the Company

                                 Dean M. Boylan
                          Vice Chairman and Director of
                       Boston Sand & Gravel Company, Inc.

                                 Edward Brodsky
                           Partner in the law firm of
                               Proskauer Rose LLP

                                 Robert L. Jones
                Chairman of Davidson - Jones - Beers Corporation




                                    OFFICERS

                                  Gary Pechota
                      Chairman of the Board, President and
                             Chief Executive Officer

                                 Terry L. Kinder
                    Vice President, Chief Financial Officer,
                             Secretary and Treasurer

                               Richard A. Familia
                      Vice President, Environmental Affairs








<PAGE>