UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Lafarge North America Inc.

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

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

None

     Indicate by check mark whether the company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ   No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of company’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
     Yes þ   No o

     The aggregate market value of the voting stock held by nonaffiliates of the company at June 30, 2004 was approximately $1,522,134,000.

     There were approximately 70,757,000 shares of Common Stock and 4,027,000 Exchangeable Preference Shares of our subsidiary, Lafarge Canada Inc., outstanding as of January 31, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of our definitive Proxy Statement for the 2005 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.

LAFARGE NORTH AMERICA INC.

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2004

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

     Statements we make in this Annual Report on Form 10-K that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “could,” “should,” and “continue” or similar words. These forward-looking statements may also use different phrases. Such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions (“Factors”) that are difficult to predict. Factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to: • the cyclical nature of our business; § competition from new or existing competitors; § national and regional economic conditions in the U.S. and Canada; § unfavorable weather conditions; § Canadian currency fluctuations; § changes in and implementation of environmental and other governmental regulations; § seasonality of our operations; § our ability to successfully identify, complete and efficiently integrate acquisitions; § levels of construction spending in major markets; § our ability to successfully penetrate new markets; § supply/demand structure of our industry; § international events that may disrupt the world economy; § and significant changes in the cost of fuel, energy and other raw materials.

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

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

PART I

Item 1. BUSINESS

Company Profile

     Lafarge North America is the largest diversified supplier of construction materials in the U.S. and Canada. We produce and sell cement, ready-mixed concrete, gypsum wallboard, aggregates, asphalt, and related products and services. Our products are used in residential, commercial and public works construction projects across North America. We estimate that approximately 40 percent of our business is related to the public works construction sector, 30 percent to the commercial sector, 25 percent to the residential construction sector and 5 percent other. In 2004, we generated net sales of $3.8 billion and, as of December 31, 2004, employed approximately 15,300 people working in more than 1,000 operations in the U.S. and Canada.

     Lafarge North America Inc. had its beginnings in 1956 when the Lafarge Group entered the North American cement market by building a cement plant in British Columbia, Canada. In 1970, Lafarge Canada Inc., part of the Lafarge Group, acquired Canada Cement Company, then already the largest cement producer in Canada. The company entered the U.S. market in 1974, and in 1981 became the second largest U.S. cement producer by acquiring General Portland Inc. In 1983, a corporate reorganization established Lafarge North America as the parent of these operations in Canada and the U.S., and we completed our initial public offering of common stock. Since 1983, we have expanded our cement, concrete, aggregates and asphalt operations throughout the U.S. and Canada, added gypsum to our product mix, and achieved an impressive record of growth mainly through acquisitions.

     Lafarge North America is part of the Lafarge Group, headed by Lafarge S.A., which held approximately 53 percent of our common stock on January 31, 2005. The Lafarge Group is the global leader in building materials with top-ranking positions in cement, aggregates, concrete, roofing and gypsum. In addition to our own operations, we also manage, for a fee, a number of U.S. cement, aggregates and concrete businesses owned by the Lafarge Group under terms set forth in a management agreement that we entered into during 2001. The operating results of these managed assets are not consolidated with our own. Unless otherwise indicated, all discussions below exclude information relating to the businesses we manage for the Lafarge Group.

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     Our ambition is to become the undisputed leader in the building materials industry–the company that has the highest quality and most innovative products, the safest and best run operations, and offers the best return to its shareholders. We believe we are uniquely positioned to become the undisputed leader because we combine the talent, technical depth, strength and brand recognition of a global company with our financial strength and excellence in managing multiple local businesses.

     Our business strategy has two fundamental components: performance and growth.

     Performance: We combine the global capabilities of the Lafarge Group with our own to manage each of our local businesses through our highly developed, proprietary programs designed to improve performance. Each of our product lines employs a specific, well-documented program designed to drive superior performance and ongoing operating improvements. These programs allow us to use the same systematic management approach at each of our locations, focusing our people on the same priorities and using proven models and management techniques. We strive to focus on customer orientation and competing based on value. Through this approach, we believe we can create additional value for our customers, differentiate our product-service offering, and increase our profitability.

     Growth: We continue to expand our market reach in North America through the disciplined use of capital. We focus on internal development and acquisition opportunities that fit strategically with our core business lines and meet our financial return criteria. We believe our strong balance sheet and significant cash flows will allow us to fund our operating plan in varied economic environments, and to capitalize on strategic opportunities when they materialize.

Business Segments

     We conduct our operations through three business segments: Aggregates, Concrete & Asphalt; Cement; and Gypsum. Each segment is a separate strategic business unit with different capital requirements and marketing strategies. At the end of 2004, we changed the name of our Lafarge Construction Materials segment to the Aggregates, Concrete & Asphalt segment to more clearly reflect the product lines managed in the segment. The segment’s scope of operations has not changed.

     We are vertically integrated to varying degrees across and within our operating segments. Our ready-mixed operations obtain most of their cement and aggregates from internal sources; we supply aggregates to our asphalt and paving operations; and we manufacture most of the paper used in our gypsum wallboard operations. Through this strategy, we can improve the quality and consistency of our products, strengthen operational efficiencies, and improve our competitive position.

     In 2004, the Aggregates, Concrete & Asphalt segment accounted for 60 percent of our net sales, the Cement segment accounted for 31 percent, and the Gypsum segment accounted for 9 percent.

     You may evaluate the financial performance of each of our segments by reviewing “Management’s Discussion of Income” included in Item 7 of this Form 10-K and “Note 17 Segment and Related Information” in our financial statements included in Item 8 of this Form 10-K, the information within each of which is incorporated herein by reference.

The Aggregates, Concrete & Asphalt Segment

     We are a leading supplier of aggregates, ready-mixed concrete and asphalt for use in the North American construction industries. We manage our aggregates, concrete and asphalt operations in the same business segment for several reasons. The customer bases for these product lines are similar, each line involves the service of local markets through large numbers of operational units, and we can realize significant cost savings by co-locating production operations for products in this segment.

Aggregates (sand, gravel, and crushed and graded stone)

     Construction aggregates are the primary raw material for concrete, masonry and asphalt, and are also used in many industrial processes. Crushed and graded stone, sand and gravel are natural resources that are used in nearly every form of residential and commercial construction.

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     Products. We classify the primary aggregates we produce as hard rock, limestone, natural sand and gravel, and “other sources,” which include recycled concrete and asphalt. Our sales are comprised of approximately 49 percent limestone, 41 percent sand and gravel, 6 percent hard rock and 4 percent “other sources.”

     Customers. We sell our aggregates primarily to road building and paving contractors, asphalt and concrete producers and general contractors, mostly in the Canadian provinces of British Columbia, Alberta and Ontario; and the U.S. states of Colorado, New Mexico, Missouri, New York, Maryland, Ohio, Michigan and Illinois. We also use a significant portion of our aggregates production in our own ready-mixed concrete and asphalt and paving businesses. In 2004, we produced 133.3 million tons of aggregates, making us one of the top four producers of construction aggregates in North America. Sales to our internal businesses accounted for 20 percent of these volumes.

     The cost to transport aggregates is high relative to sales prices. Consequently, our aggregates facilities are usually located close to their markets. We transport our aggregates primarily by truck although we also use water and rail transportation to deliver aggregates to areas that are limited by local geology or operating restrictions.

     Production and facility information. Our aggregates production operations consist primarily of the extraction, crushing and screening of rock to meet end user specifications. Our geologists identify areas with large natural aggregates deposits (usually limestone or granite) of the type and quality required by our customers. Rock is then blasted from quarries, crushed to sizes desired by the market, washed and loaded for transportation.

     We operate approximately 330 aggregates production facilities throughout the U.S. and Canada. We estimate that 58 of our largest sites, which account for approximately 75 percent of annual production, have on average, sufficient reserves to provide approximately 50 years of production at current levels. As part of our aggregates operations, we operate thousands of loaders, haul trucks and other equipment that are operated and maintained by experienced drivers and mechanics.

     Market and competitive factors. The U.S. and Canadian aggregates industry is highly fragmented with many participants, including large multi-national producers and many small producers. Aggregates businesses compete on the basis of product quality and consistency, service and price.

     We believe we have several competitive advantages in the aggregates business: our reserve positions are generally strong; our financial position allows us to fund long-term aggregates investments; we employ mature performance programs (dealing with strategy, sales and marketing, manufacturing and land management) through which we share and implement best practices throughout our aggregates operations; and our vertical integration provides us a deeper understanding of our aggregates customers and how we can become a valuable partner in their businesses.

Concrete

     The versatility, durability and economy of concrete have made it the world’s most used construction material. Concrete is often confused with cement. However, cement is just one of the ingredients used to make concrete. Basic ready-mixed concrete is a blend of cement, aggregates (sand and stone), admixtures and water. This mixture hardens to form a building material used for everything from sidewalks to skyscrapers.

     Products. We offer a wide range of concretes, from the very basic to the cutting edge including patented concrete specialty mixes such as Agilia®, a self-placing, self-compacting concrete that eliminates the need for vibration and produces an unparalleled surface finish. Our ultra-high performance concrete, Ductal®, is a self-placing ductile concrete, that can bend without breaking and which has ten times the compressive strength of traditional concrete. Our Ultra Series™ of concrete formulations allows us to cater to the specific needs of individual customer segments. Recently, decorative concrete has become attractive in many of these segments, and we have responded by launching the Artevia Color™ series.

     Customers. We sell ready-mixed concrete primarily to building contractors, mostly in Colorado, Louisiana, Maryland, Missouri, New Mexico and Western New York. In Canada, our concrete plants are positioned from coast to coast and serve customers nationwide. Our customers include building contractors of all sizes working on a broad range

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of projects from homes to highways and bridges to office and entertainment buildings. In 2004, we sold 11.4 million cubic yards of ready-mixed concrete, which we delivered to construction sites in mixer trucks.

     Production and facility information. We obtain most of our ready-mixed concrete raw materials from internal supplies and purchase the balance from other aggregates and cement suppliers when necessary. The materials are blended at ready-mixed concrete production facilities and put into the drums of concrete trucks for further mixing and delivery. As of December 31, 2004, we owned and operated 67 ready-mixed concrete plants in the U.S. and 141 plants in Canada. In addition, we own and operate a number of portable ready-mixed concrete plants to meet the specific needs of our customers.

     Concrete production is a science with the possibility of infinite mix designs. Varying cement and aggregates chemistries and characteristics, coupled with the myriad of chemical admixtures available, make the production of high quality concrete more difficult than it may seem. Significant technical expertise and quality control is needed to address construction issues such as setting time, pumpability, placeability, weather conditions, shrinkage and structural strength. As a result of our extensive research and development activities, we focus heavily on supplying concrete that meets the various custom needs of our customers.

     Depending on the mix design needed to address a customer’s specific need, raw materials represent approximately 60 percent of the cost of supplying ready-mixed concrete. Delivery costs are the next largest cost component, representing 25 percent of total costs. We own a fleet of more than 2,600 ready-mixed trucks. In 2003, we introduced “pay-by-the-load,” an innovative pay structure for the industry, to a portion of our ready-mixed concrete truck drivers. Under this program, our participating drivers have raised their hourly wages by 10 percent on average and we have realized significant productivity gains.

     Market and competitive factors. Because concrete hardens relatively quickly and requires timely delivery, we serve customers in markets located a short distance from our plants. The U.S. and Canadian concrete businesses are highly fragmented with both large and many small participants operating in localized markets. Ready-mixed concrete businesses compete on the basis of product quality and diversity, technical service, and price.

     Customer focus is an essential element of our concrete sales strategy. We seek strong customer relationships that allow us to use our expertise to solve issues that our customers confront and provide them with products or mixes that save them time and money. In 2004, we introduced a customer focused operating model to increase our responsiveness to our customers and their needs.

     In many of our markets, our ready-mixed concrete businesses operate in conjunction with operations from our other major product lines. We believe our competitive advantage lies in understanding the strategic success factors required to operate profitably in each of our markets, leveraging our expertise and products to search for value added solutions for customers, and applying our performance programs and best practices across our operations.

Asphalt and Paving

     We are both a major producer of asphalt and a leading paving contractor in many areas of the U.S. and Canada. We believe our size and diversification enables us to supply superior quality asphalt as well as to provide the expertise required to manage a variety of paving construction projects, from the most complex interstate highway project to the smallest patchwork or driveway.

     Products. We produce asphalt mixtures that satisfy nearly any specification and meet a wide range of paving challenges. Our DuraPave series of high performance asphalt mixtures can improve the durability of and reduce maintenance costs on new or existing pavements. Through our road building services, we offer combinations of base work, concrete flat work and paving services. We also offer programs for designing, building and maintaining various types of pavement systems to meet our customer’s varying needs.

     Customers. Our asphalt products and services are purchased by customers in four primary segments: governmental entities at the federal, state, provincial and local levels; industrial, commercial and institutional owners; housing subdivision developers; and small residential and commercial owners. In 2004, we sold 9.5 million tons of asphalt and placed 5.6 million tons.

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     Our principal customers in the U.S. are located mainly in Colorado, Maryland, Missouri, New Mexico and New York. Our primary Canadian customers are located in Ontario, mainly greater Toronto and Ottawa, and the metro areas of Calgary, Edmonton and Vancouver.

     Production and facility information. The production of asphalt involves mixing dried aggregates with heated liquid asphalt cement, which serves as the binder. Liquid asphalt cement is a by-product of the crude oil refining process. The asphalt is then delivered to the project site and placed by crews using specialized paving machines. As of December 31, 2004, we operated 75 asphalt production facilities in the U.S. and Canada, and also have mobile operations that can be located on-site for unique requirements or major projects.

     Fifty percent of the cost of producing asphalt consists of liquid asphalt cement. To contain costs, when possible and where permitted by regulations, we produce asphalt with lower-cost recycled asphalt pavement. The recycled product is generated through the milling of existing roads and parking lots that are resurfaced or reconstructed. This broken asphalt is crushed to specific gradations and blended into new asphalt under carefully controlled conditions to ensure quality.

     Market and competitive factors. U.S. and Canadian asphalt markets are comprised of numerous producers, including large multi-national or national players and many small producers, who generally compete on the basis of quality, service, reliability and prices in their local markets. Road construction services are generally offered through an open tender and bid process.

     We often operate our asphalt and paving businesses in conjunction with our aggregates operations, thereby adding strategic value to our aggregates business. We internally supply substantially all asphalt to our paving operations. Most of the asphalt is produced using aggregates we supply. We believe we possess competitive advantages because our production sites are generally state-of-the-art, we employ mature performance programs through which we share and implement best practices throughout our operations, and we are able to offer our customers a full range of products and services due to our integrated operations.

The Cement Segment

     Cement is a fine powder that is the principal strength-giving and property-controlling component of concrete. It is one of the oldest manufactured and most widely used products on earth. Including the operations we manage on behalf of the Lafarge Group, we are the largest producer of cement in the U.S. and Canada, and we operate the broadest cement distribution system in North America.

     Products. Our primary products are basic Portland and masonry cements, and more than 20 blended and specialty cements. Portland cement is a high quality, cost-effective basic building material used in virtually all forms of construction. Our blended cements are used in high performance applications where enhanced strength and durability properties are required. We own or license registered trademarks for our major cement and cement related brands and tailor our products to meet the individual application and performance requirements of our customers. We offer a range of services associated with these products, including technical support, advisory services, ordering and delivery logistics.

     Certain industrial by-products have physical and chemical characteristics similar to cement and may be used to enhance a portion of the cement typically used to produce concrete. These materials, such as blast-furnace slag and fly ash from coal-fired power plants, may be combined with cement to improve some of the performance characteristics of concrete. Use of these materials extends the effective utility of cement we produce, thereby, reducing the effective energy cost of producing products made with cement, as well as carbon dioxide emissions associated with such products.

     Customers. We sell cementitious materials to several thousand customers, including contractors, builders, municipal authorities, ready-mixed producers, concrete product manufacturers and masons for use in construction projects from offices and homes to dams, plants, tunnels, highways and airports.

     Given the wide variety of cementitious uses and our customer profiles, the product performance and service requirements of our customers vary significantly. We strive to recognize the diversity of our customers’ requirements and to deliver differentiated solutions to enable our customers to create more value and be more successful in their businesses.

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     In 2004, we sold approximately 20 percent of our U.S. cement volume in Michigan and Wisconsin. We also sold significant volumes in Ohio, Minnesota, Illinois, Washington, Iowa, New York, Missouri and North Dakota. In 2004, our most significant Canadian cement sales occurred in Ontario, Alberta, British Columbia and Quebec. We use a significant amount of cement we produce in our own ready-mixed concrete businesses. During 2004, approximately 13 percent of our total cement sales were made to affiliates.

     We maintain distribution and storage facilities at all of our cement manufacturing and finishing plants and at approximately 80 other locations, including one deep-water ocean terminal near New Orleans, Louisiana. This extensive coast-to-coast network of distribution and import facilities enables us to operate our plants in an integrated fashion and to optimize our production patterns to adjust to changing market needs.

     We distribute our cement primarily in bulk, although we distribute some in bags. We transport cement via trucks, rail cars and waterborne vessels from our plants to distribution facilities or directly to our customers. Some of our U.S. customers make their own transportation arrangements and take delivery of cement at our manufacturing plants or distribution facilities.

     Production and facility information. Cement is made out of four basic ingredients: limestone, sand, clay and iron-rich materials. These are crushed and finely ground, then burned at high temperatures in a kiln to form an intermediary product called clinker. The clinker is then finely ground along with gypsum and other additives to make cement.

     According to a December 2002 report prepared by the industry’s Portland Cement Association (the most recent report available), we have 12.2 percent of the total active industry cement clinker production capacity in Canada and the U.S. including 34.8 percent in Canada and 7.8 percent in the U.S.

     The following table shows the location, types of process and rated annual clinker production capacity of each of our operating cement manufacturing plants at December 31, 2004. Annual clinker production of a cement plant might be less than its rated capacity due principally to product demand fluctuations and seasonal factors.

Rated Annual Clinker Production Capacity of
Cement Manufacturing Plants
(in million short tons)

*

The dry production process is a newer, more fuel efficient production process than the wet production process. However, the wet production process allows for easier use of alternative fuels.

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     We obtain the limestone required to manufacture cement principally from land we own or in which we have long-term quarrying rights. These sources are generally located close to our manufacturing plants except in a few instances in which sources are further away but for which we have ready access to water transportation. We estimate that limestone reserves for most of our cement plants will be adequate to permit production at present levels for at least 50 years.

     Cement production is energy and capital intensive. The approximate cost components for our cement production are as follows:

     Cement production processes and technologies provide many opportunities for better operators to make a significant difference in their performance. With an accumulated experience from operating more than 150 cement plants around the world, the Lafarge Group has developed a wealth of cement manufacturing expertise, which we employ to increase our asset utilization, lower our production costs and increase the performance of our products. We share and reinforce this leadership position through a culture of knowledge-sharing which stresses driving superior performance and ongoing operating improvements.

     We place special emphasis on becoming more efficient in our sourcing and use of fuel. Most of our cement plants are equipped to convert from one form of fuel to another with very little interruption in production, thus avoiding dependence on a single fuel and permitting us to take advantage of price variations between fuels. All of our cement manufacturing plants have fuel flexibility between at least three of the following four base sources: coal, petroleum coke, natural gas and oil. We seek to replace coal with less costly fuel sources such as petroleum coke and fuel-quality waste materials. Such sources constituted 46 percent of the total fuel we used in our cement operations during 2004, and we constantly strive to seek additional alternative fuel sources to use in our cement manufacturing operations.

     Market and competitive factors. The cement industry in the U.S. and Canada has been consolidating during the past 10 years, with smaller companies generally being acquired by large international public companies. Domestic cement production in the U.S. and Canada supplies approximately 84 percent of U.S. and Canadian domestic consumption. The balance is supplied through imports usually managed by domestic producers. Consequently, U.S. and Canada cement plants generally operate at full capacity throughout variations in the business cycle.

     The competitive radius of a typical cement plant for common types of cement is approximately 250 miles, except for waterborne shipments that can be economically transported considerably greater distances. Sales of cement are usually made on the basis of quality, service, reliability and prices in each market area. Thus, a cement manufacturer’s competitive position depends largely on the location and operating costs of its plants and associated terminals.

The Gypsum Segment

     Gypsum drywall is the predominant material used for finishing interior walls and ceilings in residential, commercial and institutional construction across North America. Use of drywall has risen dramatically in recent years. Wallboard demand in the U.S. has grown more than 45 percent over the last ten years due to the trend towards larger homes (higher ceilings and increased square footage), remodeling of residential and commercial properties, low mortgage rates and record high housing starts.

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     Products. We offer a full line of quality drywall and finishing products for commercial and residential construction. These products accommodate a variety of decorative treatments for interior walls and ceilings and for uses in fire retardant, water-resistant, sag-resistant and abuse resistant applications. We also offer a top quality line of finishing products to meet the varied needs of building professionals.

     In 2004, we launched the Rapid Deco® Level 5™ Skim-Coated Drywall and Joint Finishing System, a fast and simple solution to address technical performance and design issues concerning specialized lighting and paint treatments.

     Customers. Our gypsum drywall products are sold to residential and commercial building materials dealers, gypsum wallboard specialty distributors, original equipment manufacturers, building materials distribution companies, lumber yards and “do-it-yourself” home centers.

     We utilize contracted trucks to transport finished gypsum board to distributors and other customers. Additionally, our Newark, New Jersey, Silver Grove, Kentucky and Palatka, Florida plants are equipped to ship by rail. In many markets, our plants can backfill for each other in deliveries to our customers.

     Production and facility information. Gypsum wallboard is manufactured in large automated production plants in which gypsum rock is ground into a powder that is heated and blended with water to form a slurry. The slurry is then extruded between sheets of paper, dried and cut into board lengths. In some plants, natural gypsum rock is replaced with synthetic gypsum, which is generated as a byproduct of chemical manufacturing and power production operations.

     We own and operate five drywall plants and one joint compound plant in North America. We also are party to a wallboard paper joint venture with Rock-Tenn Company in Lynchburg, Virginia, named Seven Hills, LLC. Through this venture we are vertically integrated into wallboard paper, as are most of our competitors. Paper integration is important in terms of controlling the cost and quality of the final product. This venture provides us a continuous supply of high quality wallboard paper to meet our ongoing requirements.

     Our two largest drywall plants (Silver Grove and Palatka) use synthetic gypsum as their raw material. Both are located adjacent to their synthetic gypsum sources and have long term supply contracts with those sources. Our other drywall plants use natural gypsum.

     Our production capacity has grown from a two-plant network in 1996 with a capacity of 0.7 billion square feet to five plants with a capacity of 2.4 billion square feet. In 1996, we acquired the Buchanan, New York plant, located 30 miles outside of New York City, and the Wilmington, Delaware plant. In 2000, we acquired a drywall plant in Newfoundland, Canada and a joint compound manufacturer in Quebec. In 2002, we acquired the Newark, New Jersey plant and ceased operating the Wilmington plant as part of an ongoing strategy to service customers predominantly from more efficient plants.

     In 2000 and 2001, we opened two of the largest single-line drywall production facilities in the U.S., one in Silver Grove, Kentucky, just outside of Cincinnati, Ohio, and the other in Palatka, Florida. Each has the capacity to produce up to 900 million square feet of 1/2-inch drywall a year. As part of our environmental commitment, both plants were built to satisfy 100 percent of their primary raw material needs by using recycled materials, including reclaimed paper and synthetic gypsum. These state-of-the-art low cost facilities have enabled us to grow with our customers and expand our market positions.

     In November 2004, we announced plans to invest $75 million to substantially upgrade and double the capacity of our Buchanan gypsum drywall manufacturing facility. The modernized production line is being built to produce 650 million square feet (on a practical capacity basis) of gypsum wallboard annually to meet the growing demands of our residential and commercial customers in the Northeast region. The renovation is expected to begin mid-2005 and be completed in mid-2006.

     Following this upgrade, our average U.S. plant production age will be approximately five years, resulting in a newer and more efficient plant network. We believe our plants will be among the lowest cost producers in their primary markets when the Buchanan project is completed.

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     The following table shows the locations and capacity of our gypsum plants:

*		Rated capacity refers to full-time production of 1/2-inch drywall.
**		Practical capacity refers to capacity assuming variations in product mix and scheduled maintenance.

     Natural gas is the major energy source for our drywall manufacturing process. We purchase natural gas on a contract basis with transportation negotiated under long-term contracts. Energy costs represent approximately 17 percent of the total production costs of manufacturing gypsum drywall. To minimize energy costs, we designed both the Silver Grove and Palatka plants with energy efficient technologies, and we plan to install similar technologies at the Buchanan plant during its upgrade.

     Market and competitive factors. Our plants serve customers in markets primarily east of the Mississippi River, an area representing nearly two thirds of U.S. wallboard demand. Our plants are located relatively close to large markets, which generally allows us to deliver product to our customers within 24 hours. Our capabilities are further enhanced by a flexible plant network that can accommodate shifting demand across our markets. In 2004, the states in which we had the most significant sales of gypsum products were Florida, New York, New Jersey and Ohio.

     In the past several years, the U.S. gypsum wallboard industry has experienced consolidation resulting in a few large companies accounting for most of the industry’s capacity. We estimate that we have a market share of 15 to 20 percent in those market areas which are in close proximity to our U.S. plants. Drywall producers primarily compete on a regional basis due to the cost of transporting products over long distances. Producers whose customers are located close to their drywall plants benefit from lower transportation costs. We compete with other producers based on price, product quality and customer service.

Other Factors

     The following discussions include information common to all three of our business segments.

     Product Demand. The demand for all of our major products and services are closely linked to construction activity levels. Construction activity levels are influenced by many factors, including availability of public funds, interest rates, inflation, consumer spending habits, demographic shifts, environmental laws and regulations and employment levels. As our products are expensive to transport, they are particularly susceptible to regional demand factors that may fluctuate more widely and more frequently than national demand factors. We cannot predict or control these factors.

     Seasonality and Weather. Our sales are highly seasonal since construction activity typically diminishes in the winter, particularly in Canada and in the northern United States where we have significant operations. Also, weather conditions in our markets during the construction season may significantly impact demand for our products. As a consequence, our sales and earnings are normally highest in the third quarter and lowest in the first quarter. We believe the most effective way to review our results is on a trailing 12-month basis as our results for any quarter are not indicative of results to be expected for the year as a whole. You may find additional information about our quarterly

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results in “Note 22 Quarterly Data (unaudited)” in our financial statements included in Part II, Item 8 of this Form 10-K, which information is incorporated herein by reference.

     Energy Costs. We purchase a significant amount of energy from various sources to conduct our operations, including fossil fuels and electricity for cement production, natural gas for gypsum wallboard and asphalt production, and diesel fuel for distribution and production-related vehicles. Fuel cost increases have in the past and may in the future adversely affect the results of our operations and our financial condition. Prices and availability of all petroleum products are subject to political, economic and market factors that are generally outside of our control. To help protect against fuel cost increases, we have equipped several of our cement plants to use alternative fuels. As appropriate, we also utilize long-term energy agreements and derivative financial instruments to hedge against increases in our fuel costs.

     Research and Development Activities. In 2004, we spent $4.1 million in research and development costs, including $3.8 million paid to the Lafarge Group pursuant to agreements we have with them. We have access to the Lafarge Group’s state-of-the-art research and development resources and the Lafarge Group shares with us its new product developments and enhancements for each of our product lines through, in part, agreements by which we share certain costs for research and development, strategic planning and marketing. We also conduct cement research and development activities at our laboratory in Montreal, Canada, which we believe is one of the largest private laboratories in the North American cement industry. Also, our subsidiary, Systech, performs research and development focused on increasing utilization of alternative fuels.

     Trademarks and Patents. We either own or have rights to more than 200 trademarks and patents relating to our operations and products. Our trademarked concrete mix designs, including Agilia^®, Futurecrete^®, Agrifarge^®, Artevia Color™ and WeatherMix^®, provide customers with enhanced performance for specific applications. Specialty cements and cement-related products like our trademarked Tercem 3000^®, Maxcem™, Supercem^® and SF^® cement are designed for durable applications such as bridges, underwater structures, skyscrapers and industrial floors. Further, through a licensing agreement, we market Ductal^®, a breakthrough composite building material, in the U.S. and Canada. We believe that our rights under existing trademarks are of value to our operations, but no one trademark or group of trademarks is material to the conduct of our business as a whole.

     Backlogs. The amount of backlog orders, as measured by written contracts, in all of our operations is normally not significant and was not material at December 31, 2004.

     Dependence on Significant Customers. None of our operations are dependent upon either a single customer or a few customers, and no single unaffiliated customer accounted for 10 percent or more of the sales of any of our segments.

Managed Assets

     We continue to manage and operate certain U.S. cement, aggregates and concrete businesses owned by the Lafarge Group as a result of its 2001 acquisition of U.K.-based Blue Circle Industries PLC. For managing these businesses we receive $12 million annually plus potential incentives for improving their operating results. As of December 31, 2004, these businesses include 5 full production cement manufacturing plants, 15 cement terminals, 1 slag grinding facility, 15 aggregate-producing pits and quarries, 100 ready-mixed concrete plants and 10 concrete block plants which we manage in conjunction with our own to maximize the efficiency of our respective operations. Unless terminated at least six months in advance, our agreement to manage these assets renews annually.

     We are reimbursed our direct costs and expenses for managing these businesses, as well as for the selling, general and administrative costs allocated to them. We are also reimbursed for payroll and other related costs and expenses we incur associated with the employees who operate the managed assets. If our agreement with Lafarge S.A. to manage these businesses terminates, these employees are to be returned to the employment of the Blue Circle entities and we are to be reimbursed for any cost, expense or financial consequence arising from the structural separation of our respective operations.

     Our option to acquire these assets from Lafarge S.A. expired unexercised on December 31, 2004. The decision to allow the option to expire was made by a special committee of independent directors formed to evaluate the matter and was approved by our Board of Directors.

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Insurance Programs

     We maintain a comprehensive insurance program to protect the company from certain types of property and casualty losses, which utilizes commercial insurance and our two captive insurance companies. Commercial property insurance with replacement coverage is purchased to insure against losses to plants and equipment. Additionally, the property policy provides business interruption coverage for our cement and gypsum manufacturing plants, as well as certain of our aggregates operations. We also purchase commercial insurance for our risks associated with workers compensation, auto liability and general liability exposures. The deductibles on these coverages range from $1 million to $5.0 million per claim. Our captive insurance companies are used to fund losses below these amounts. We maintain other insurance programs as appropriate. We believe the insurance programs, policy limits and deductibles are appropriate for the risks associated with our business and in line with coverage available in the market.

Employees

     The total number of people we employ varies significantly on a seasonal basis as we typically hire several thousand more workers during the peak months of the summer. Measured at December 31, 2004, we employed approximately 15,300 people, including approximately 2,700 individuals operating the managed assets.

     We are party to several collective bargaining agreements with numerous labor unions. Generally, these agreements have multi-year terms and expire on a staggered basis.

Environmental Matters

     Our operations involve the use, release, discharge, disposal and clean up of substances regulated under federal, state, provincial and/or local environmental protection laws and regulations. We believe that environmental performance is critical to achieving our ambition to become the undisputed industry leader. We strive not only to maintain compliance with all applicable environmental laws and regulations, but also to continuously improve our environmental performance.

     Two of our U.S. cement plants burn fuel-quality wastes and are subject to emission limits and other requirements under the U.S. Resource Conservation and Recovery Act (“RCRA”) and Boiler and Industrial Furnaces regulations. We may burn such wastes at several of our cement plants in the future. Our production of cement kiln dust by-product is currently excluded from federal hazardous waste regulations under RCRA, but under current U.S. Environmental Protection Agency (“EPA”) proposals, would be subject to state regulation.

     Under the Clean Air Act, we must install the best feasible equipment to control certain hazardous air pollutants at our U.S. cement plants to meet maximum achievable control technology standards. The Clean Air Act also imposes on us certain permitting requirements and requires us to pay recurring permit fees for our U.S. operations deemed to be “major sources” of air pollution. We will be required to comply with state plans to implement the EPA’s new National Ambient Air Quality Standards for particulate matter 2.5 to 10 microns in size and NO_x relating to formation of atmospheric ozone. The EPA is considering certain state plan revisions for NO_x emissions as well as implementation schedule changes, which will likely result in state plans being in place by 2007 and compliance sometime between 2010 and 2015. The EPA has also recommended to the states that cement plants located east of the Mississippi River and in Missouri reduce NO_x emissions by 30 percent from a 1995 baseline. We must also comply with applicable state implementation plan air quality requirements to SO₂, CO and lead. Finally, during 2005 the U.S. Congress is scheduled to consider changes to the Clean Air Act relating to further SO₂, NO_x and mercury reductions, primarily for the utility industry but these changes could impact other industrial sectors as well.

     As a result of global climate change, and particularly the Kyoto Protocol which was ratified by Canada and went into effect in February 2005, manufacturers like us face the prospect of CO₂ stabilization or reduction measures, including possible raw material and production limitations and/or fuel-use or carbon fuel taxes. Cement manufacturers, including us, voluntarily committed to improve energy efficiency approximately 1 percent per ton of clinker produced in Canada per year from 1990 to 2005, and to reduce CO₂ output per ton of U.S. production by 10 percent between 1990 and 2020. Achievement of these goals is generally on target. Further, the Canadian cement industry continues to discuss with the Canadian government how the industry might implement the Kyoto Protocol.

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     We are currently involved in the Superfund remediation of one contaminated site as described in Note 20 to our financial statements included in Part II, Item 8 of this Form 10-K, which description is incorporated herein by reference. We have initiated in the past, and may in the future initiate, voluntary clean-up activities at certain of our properties to mitigate liability exposure for environmental matters and/or in connection with our sale of property.

     Based on the EPA’s prior interpretation of certain Clean Air Act new source review and permitting rules, several of our cement plants changed fuels in the early 1990’s to petroleum coke or to a coal/coke mixture. The EPA contends that such rules do not exempt changes in fuel by cement manufacturers unless the plant at which the change occurs was built with the expressed intent of accommodating the alternate fuel. In 2004, we continued discussions with the EPA concerning changes in fuel at our Alpena, Michigan and Joppa, Illinois cement plants, as well as new source review compliance of all our U.S. cement plants. As a consequence of these discussions, we may be required to make capital expenditures at certain of our cement plants and we may be required to pay fines and penalties.

     In 2004, our capital expenditures and remediation expenses for environmental matters were not material to our financial condition, nor were environmental liabilities recorded at December 31, 2004. However, our expenditures for environmental matters generally have increased over time and are likely to increase in the future. Because of the complexity of environmental laws, differing environmental requirements in the U.S. and Canada, and uncertainties surrounding environmental compliance, permitting, technology and related matters, we cannot predict whether capital expenditures and remediation expenses for future environmental matters will materially affect our financial position, results of operations or liquidity.

Available Information

     This annual report on Form 10-K, our reports on Form 10-Q and our current reports on Form 8-K are available free of charge on our website, www.lafargenorthamerica.com, as soon as reasonably practicable after we electronically file such reports with or furnish them to the Securities and Exchange Commission. In addition, we have posted our corporate governance guidelines, our code of ethics for directors, officers and employees and the charters of the Audit, Governance, Nominating and Management Development and Compensation Committees of our Board of Directors on our website at www.lafargenorthamerica.com. Copies of the guidelines, the code of ethics and the charters are available in print to any stockholder who requests them. Stockholders should direct any such request to L. Philip McClendon, Senior Vice President – General Counsel and Secretary, Lafarge North America Inc., 12950 Worldgate Drive, Herndon, Virginia 20170.

Item 2. PROPERTIES

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

     We own free of major encumbrances all of our cement plant sites (active and closed) and the land on which they are located and quarries (active and closed), as well as terminals, grinding plants, gypsum drywall plants and miscellaneous properties, except the land, quarry and buildings related to the Sugar Creek cement plant, the land on which the Exshaw cement plant and Newark drywall plant were built, and the Kamloops, British Columbia limestone and cinerite quarries.

	•	The Exshaw plant is built on land leased from the province of Alberta. The original lease has been renewed for a 42-year term commencing in 1992. Annual payments under the lease are presently based on a fixed fee per acre.
	•	The manufacturing facilities of our Newark, New Jersey plant, which we acquired in January 2002, are located on leased land from the Port Authority of New York and New Jersey under an agreement that expires in 2031.
	•	The Kamloops limestone and cinerite quarries are located on land leased from the province of British Columbia until March 2022.

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

     We believe that each of our cement and gypsum drywall manufacturing plants is in good operating condition.

     At December 31, 2004, we owned slag grinding facilities at South Chicago, Illinois; Spragge, Ontario and Stoney Creek, Ontario. We also have slag grinding capacity at our Joppa, Illinois and Seattle, Washington plants and Montreal-East, Quebec grinding facilities.

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

     Lafarge Canada Inc.’s cement manufacturing plant limestone quarrying rights in Quebec, Nova Scotia, Ontario, Alberta and British Columbia are held under quarry leases, some of which require annual royalty payments to provincial authorities. We estimate that limestone reserves for most of our cement plants currently producing clinker will be adequate to permit production at present capacities for at least 50 years. Other raw materials, such as clay, shale, sandstone and gypsum are either obtained from reserves owned by us or are purchased from suppliers and are readily available.

     We own substantially all of our aggregate, ready-mixed concrete and concrete products plants and believe that all of our plants are in good operating condition. We also own the majority of our paving and road construction equipment.

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

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

Item 3. LEGAL PROCEEDINGS

     Information set forth in “Note 20 Commitments and Contingencies” in our financial statements included in Item 8 of this Form 10-K in reference to legal proceedings is hereby incorporated by reference in answer to this Item 3.

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

     None during the fourth quarter ended December 31, 2004.

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PART II

Item 5.

MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     Certain information required in response to Item 5 is reported in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Management’s Discussion of Shareholders’ Equity” of this Annual Report, and is incorporated herein by reference.

     On January 31, 2005, 70,757,000 shares of our common stock (“Common Stock”) were outstanding and held by 3,871 record holders. In addition, on January 31, 2005, 4,027,000 Exchangeable Preference Shares of Lafarge Canada Inc., which are exchangeable at the option of the holder into Common Stock on a one-for-one basis and have rights and privileges that parallel those of the shares of Common Stock, were outstanding and held by 7,285 record holders.

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

     Issuer Purchases of Equity Securities (dollars in thousands, except per share amounts):

(1)		All shares were purchased on the open-market and pursuant to the publicly announced program.
(2)		Includes brokerage commissions.
(3)		On May 5, 2003, we announced that our Board of Directors approved a share repurchase program through December 31, 2004. Under this program, we are authorized to purchase in aggregate up to $50.0 million. On November 2, 2004, we announced that our Board of Directors approved a new share repurchase program commencing on January 1, 2005 and expiring on December 31, 2005. Under this program, we are authorized to repurchase shares in aggregate up to $60 million.

     During the period covered by this report, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

     Refer to Item 12 of this report for information regarding the “Equity Compensation Plan Information” table.

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Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

(a)		Net sales from continuing operations include $90.2 and $94.2 for the years ended December 31, 2001 and 2000, respectively, related to the divested operations of Lafarge Florida Inc. (unaudited).
(b)		Earnings from continuing operations include $11.4 and $13.0 for the years ended December 31, 2001 and 2000, respectively, related to the divested operations of Lafarge Florida Inc. (unaudited).
(c)		EBIT, a non-GAAP financial measure, represents earnings from continuing operations before interest expense, redeemable preferred shares dividends and income taxes and includes $19.4 and $21.8 for the years ended December 31, 2001 and 2000, respectively, related to the divested operations of Lafarge Florida Inc. (unaudited). Management believes EBIT better reflects the ongoing performance of the company and enables management and investors to meaningfully trend, analyze and benchmark the performance of the company’s operations.

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(d)

Excludes preferred shares and note payable totaling $127.7 million issued in conjunction with the acquisition of Warren Paving & Materials Group which was treated as non-cash financing activities for cash flow reporting.

Item 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SUMMARY OF 2004 RESULTS AND OUTLOOK

     This was a record year for us in sales and earnings. Our operating results benefited from stronger economic fundamentals as well as good operating performance. Sustained construction activity in both the U.S. and Canada, helped by robust economic growth and continued low interest rates, led to strong demand levels in most of our markets. In addition, favorable weather both at the beginning and end of the year resulted in strong volumes in the first and fourth quarters, typically low seasons in the construction business. Pricing trends continued to be positive, and successful price increases in most of our product lines were achieved in the majority of our markets.

     Overall, our income before redeemable preferred shares dividends, interest and income taxes from continuing operations reached a record $482 million, a 17 percent increase over 2003, with strong volumes for cement, aggregates and gypsum. The prior year included a divestment gain of $31.2 million related to the sale of our Detroit cement terminal. The Canadian dollar favorably contributed $18.3 million to our 2004 operating results, although this was partially offset by a $13.2 million increase in pension and other postretirement benefit expenses and $3.8 million of foreign exchange losses on our U.S. dollar investments in Canada. Cement operating income was at an all time high, boosted by strong volumes in all markets and improved prices. Our gypsum business returned to full year profitability benefiting from the successful implementation of four price increases throughout the year and supported by improved manufacturing performance. Aggregates, concrete and asphalt operating income improved by 13 percent compared to 2003, driven primarily by the aggregates business which alone generated a $32 million profit improvement.

     Net income from continuing operations in 2004 was $295.5 million, or $3.86 per diluted share, including several unusual items that contributed a net benefit of $0.03 per diluted share. These unusual items included a tax benefit of $6.3 million ($0.08 per diluted share), interest income of $4.9 million ($3.2 million after taxes or $0.04 per diluted share) associated with an income tax receivable partially offset by legal expenses of $10.6 million ($6.9 million after taxes or $0.09 per diluted share) related to settled litigation in our cement segment. The results of the year compare with an

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income of $217.4 million, or $2.93 per diluted share in 2003 which included a gain of $31.2 million ($18.9 million after taxes or $0.25 per diluted share) from the sale of one of our cement terminals, partially offset by $7.6 million ($0.10 per diluted share) associated with provincial tax changes legislated in both Ontario and Alberta as well as the higher tax rate applicable to the sale of the Detroit cement terminal.

     We closed the year in strong financial condition. At the end of the year, total debt net of cash, cash equivalents and short-term investments was negative $24.7 million compared with positive $17.9 million in 2003. Our total debt was $827.3 million as of December 31, 2004 compared with $717.2 million at the end of 2003. Cash, cash equivalents and short-term investments were $852 million at the end of the year compared to $699.2 million at the end of 2003. Reported cash flow from operations was $331 million compared with the $406 million in 2003, reflecting our decision to make additional cash contributions in 2004 to pre-fund certain pension plans (reducing the comparative cash flows by approximately $48 million) and decreasing the amount of securitized receivable financing (reducing the comparative cash flows by approximately $87 million).

     On October 22, 2004, President George W. Bush signed into law the American Jobs Creation Act of 2004 (the “Jobs Act”). Among other things, the new legislation reduces the tax rate on foreign earnings repatriated to the U.S. by December 31, 2005 and subsequently used for qualifying reinvestments in the U.S. In 2005, we decided to take advantage of this temporary deduction and intend to repatriate almost $1.1 billion in cash from Canada to the U.S. This money represents accumulated after-tax earnings associated with our normal operations in Canada. We will record a one-time tax charge associated with the repatriation of between $100 million and $120 million during the first quarter of 2005. The exact amount of these taxes depends on pending technical corrections to the legislation and expected interpretative guidelines to be issued by the Internal Revenue Service. The repatriation will allow us to improve our capital structure and more efficiently deploy available capital.

     Looking forward to 2005, we have seen no indications of change in the overall market environment since the strong close to the fourth quarter of 2004. However, year-over-year comparisons will also have to take into account the high level of demand growth and favorable weather conditions experienced in 2004. We expect the continuation of solid demand and a favorable pricing environment in most of our markets. However, we also expect to experience cost pressures, especially in energy and energy-related costs such as distribution costs. Also, we estimate our pension and other postretirement expenses to increase by $14 million in 2005. On July 1, 2005, we will commence recognizing expenses associated with then unvested stock option grants and new stock option grants after that date in connection with our adoption of a new accounting standard.

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

MANAGEMENT’S DISCUSSION OF INCOME

     The Consolidated Statements of Income included in Item 8 of this Annual Report summarize the operating performance of Lafarge North America Inc. for the past three years. It should be noted that the discussions focus on earnings from continuing operations. Lafarge Florida Inc. (our cement import and grinding operation) was sold to Florida Rock Industries Inc. in August 2003. The Florida operations, including the gain on the sale, are shown separately in our financial statements as “discontinued operations” in both 2003 and 2002. To facilitate analysis, net sales and operating profit are discussed by operating segment and are summarized in the table below. (See “Note 17 Segment and Related Information” in the Notes to Consolidated Financial Statements for further segment information.)

     Our three operating segments are:

     Aggregates, Concrete & Asphalt – the production and distribution of construction aggregates, ready-mixed concrete, other concrete products and asphalt, and the construction and paving of roads.

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

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

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(a)

EBIT is reconciled to the closest GAAP measure in “Item 6 Selected Consolidated Financial Data.”

YEAR ENDED DECEMBER 31, 2004

Net Sales

     Our net sales from continuing operations increased 13 percent in 2004 to $3,763.3 million from $3,318.9 million in 2003. Demand for our products remained robust, which was supported by stronger economic conditions and continued low interest rates. In addition, we benefited from favorable weather both at the start and end of the year. Excluding divested operations, all our product lines recorded higher shipments for the full year compared to last year, with cement, aggregates and gypsum setting new records for volumes. Compared to 2003, our selling prices generally increased with the exception of our paving business. In addition, net sales benefited from continued strength of the Canadian dollar, which finished the year close to 83 cents per U.S. dollar compared to 78 cents per U.S. dollar in the prior year. Excluding the exchange rate effect, net sales from continuing operations were 10 percent higher than last year.

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     U.S. net sales from continuing operations increased to $2,113.9 million, up 12 percent compared to $1,882.0 million in 2003, driven by high cement, aggregate and gypsum sales. Canadian net sales increased 15 percent to $1,649.4 million in 2004 (7 percent excluding the favorable exchange rate effect) primarily due to higher cement, aggregate and paving sales.

  Aggregates, Concrete & Asphalt

     Net sales from the aggregates, concrete and asphalt segment, formerly identified as construction materials segment, totaled $2,274.1 million in 2004, which were 12 percent higher than the $2,032.5 million in 2003. Excluding the impact of the favorable Canadian exchange rate, net sales were up 7 percent with stronger sales across all product lines.

     Net sales of construction aggregates were $732.1 million, which were 19 percent higher than 2003 (15 percent higher excluding the favorable exchange rate). Shipments of construction aggregates increased 12 percent in 2004 to a record 133.3 million tons as a result of good weather conditions and solid overall demand in the U.S. and in Canada. U.S. volumes were up 11 percent as a result of higher sales in the Great Lakes, Maryland and Missouri. Canadian volumes were 13 percent higher than 2003 levels due to strong sales in Western Canada, certain Ontario markets and Montreal as well as increased exports to the U.S. west coast. Average selling prices in 2004 were up 2 percent in Canada, in local currency, and 3 percent in the U.S. due in part to a better product mix as well as successful implementation of general price increases in most markets.

     Ready-mixed concrete sales totaled $751.0 million in 2004, up 9 percent from last year (5 percent higher, excluding the favorable exchange rate). Overall ready-mixed concrete shipments increased by 3 percent to 11.4 million cubic yards as stronger demand in western Canada offset a flat U.S. market. Strong sales in Maryland, New York and New Mexico were offset by lower volumes in Louisiana (completion of New Orleans airport project) and Missouri. Canadian volumes increased by 6 percent over 2003, as residential construction activity in Vancouver and Calgary remained strong. However, price improvement gains in most regions were offset by pricing pressures in the Denver, Toronto and Montreal markets.

     Asphalt and paving sales totaled $692.3 million in 2004, up 9 percent from 2003 (up 3 percent, excluding the favorable exchange rate). Asphalt volumes were up 6 percent compared to prior year due to strong demand, particularly in Calgary and Denver, and more favorable weather. Excluding divested operations, paving volumes were up 8 percent due to strong demand in Calgary, Edmonton and Denver.

   Cement

     Cement net sales from continuing operations increased 13 percent to $1,352.7 million in 2004 from $1,198.3 million in 2003 (up 10 percent excluding the favorable exchange rate). Cement shipments in 2004 reached a record 14.2 million tons, which were 8 percent higher than 2003 shipments excluding divested Florida operations. Strong general economic conditions and favorable weather contributed to make 2004 an exceptionally strong volume year. Some regional cement shortages were experienced, particularly in the first half of the year, requiring imports in order to meet customer demand. Sales volumes in the U.S., excluding divested Florida operations, increased by 8 percent compared to 2003, driven by strong demand in all major markets except the Great Lakes markets, which were flat. In Canada, sales volumes increased 6 percent as demand was up sharply in Western Canada.

     Average selling prices continued their positive trend that began in the second quarter, driven by successful price increases in a majority of our markets between January and May. For the first time in more than a decade, we were able to successfully implement a second price increase in selected U.S. markets allowing us to recover most of the shortfall due to the price degradation that occurred in the second half of 2003. Average selling prices increased by 2 percent year-over-year, with the U.S. gaining 3 percent and Canada increasing by 2 percent in local currency. We expect the full benefit of these price increases will be realized during 2005. In addition, new price increases of $6 to $8 per ton took effect in most of our U.S. and Canadian markets on January 1, 2005, and an additional price increase of $5 per ton in most markets has been announced in the U.S. effective July 1, 2005.

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   Gypsum

     Net sales from gypsum operations increased by 28 percent to $326.6 million from $254.3 million in 2003 benefiting from strong demand as well as the impact of four price increases implemented throughout the year. Sales volume reached 2.2 billion square feet, which represents an increase of 4 percent over 2003 sales volume. We experienced continued growth of residential construction both in the U.S. and Canada, supported by significantly improved manufacturing performance by our plants. The average mill net price per thousand square feet for the year was $123 compared with $98 in 2003, mainly derived from the strong performance of our U.S. markets. A price increase went into effect on January 10, 2005.

Performance by Line of Business

   Aggregates, Concrete & Asphalt

     Our aggregates, concrete and asphalt segment earned $207.8 million on sales of $2.3 billion, 13 percent higher than 2003 earnings of $183.7 million on sales of $2.0 billion. Profit growth was driven primarily by the aggregates business, which alone generated a $32 million profit improvement. The favorable impact of the Canadian dollar, which contributed $8.6 million to reported profit for the year, was more than offset by a $9.0 million increase in pension and other postretirement expenses. In addition, higher fuel costs across all product lines and increased maintenance costs with higher plant activity resulted in increased operating costs. As a result, segment operating income as a percentage of net sales at 9 percent was flat compared to 2003.

     Construction aggregates recorded an operating income of $155.8 million in 2004, which was 26 percent higher than 2003, driven by record volumes and higher selling prices across all regions. This was partially offset by cost increases, including additional quarry stripping costs of $5 million and higher energy costs of $4 million. Operating margin improved by 1 percentage point in 2004 compared to the year-ago level.

     Ready-mixed concrete profits declined by $3.9 million to $30.8 million in 2004. Most of the shortfall came from the Denver, Toronto and Montreal markets where market conditions and competitive pressures limited our ability to recoup increased raw material prices. The strong performance of our Western Canada and Eastern U.S. markets partially offset the shortfall. Performance based distribution initiatives continued to help offset increased delivery, maintenance and fuel costs. Operating margin was 1 percentage point lower than last year.

     Asphalt and paving operations earned $31.0 million in 2004, which was flat compared to 2003. Paving contract margins declined, which more than offset benefits from increased asphalt volumes and the absence of losses associated with the Western U.S. portable highway paving business we exited in 2003. Increased use of recycled products helped offset higher costs during the year.

   Cement

     Cement operating profit from continuing operations was $328.4 million in 2004, which was 13 percent higher than last year. The results reflect increased volumes, higher prices and the stronger Canadian dollar, which were partially offset by increased fuel, raw material and distribution costs. Strong general economic conditions and sustained construction activity allowed us to successfully implement two price increases in selected U.S. markets. A $12.1 million favorable impact of the Canadian dollar partially offset a $2.4 million increase in pension and other postretirement expenses and $10.6 million of legal expenses related to settled litigation. Clinker production at 12.8 million tons was up 900,000 tons for the year. This 7.5 percent production increase was achieved without increasing plant fixed costs from 2003 levels. Several of our plants achieved record production levels for the year. Variable costs were up for the year, primarily driven by fuel and power costs increases which unfavorably impacted operating earnings by $7.4 million. Freight costs increased $2.0 million due to sub-optimal shipping patterns we experienced to serve our customers during the tight market conditions earlier this year.

     As a result, cement operating income from continuing operations as a percentage of net sales was 24.3 percent, which was similar to 2003. In 2004, we increased our imports by approximately 200,000 short tons to meet our customer needs. The low-margin sales of imported cement combined with the legal fees associated with the settled litigation negatively impacted our 2004 operating margin.

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   Gypsum

     Our gypsum drywall operations recorded $33.3 million operating profit in 2004 compared to a loss of $5.0 million in 2003, an improvement of $38.4 million. Our gypsum operations have generated profit for the past 6 quarters, as we benefited from continued strong residential demand and higher prices. In addition, significantly improved manufacturing productivity improved our overall performance, partially offsetting higher paper costs and increased energy expenses. Production volumes from our two newer plants in Kentucky and Florida now account for 72 percent of total production.

Corporate and Unallocated Expenses

     Corporate and unallocated expenses in 2004 were $87.5 million, which represents an increase of $30 million compared to 2003. The prior year included a $31.2 million gain on the sale of our Detroit cement terminal. Higher corporate expenses in 2004, due to increased pension and other postretirement expenses, higher salaries, governance and compliance costs, were partially offset by $10.6 million of lower foreign exchange transaction losses.

Income from Managed Assets

     Income from the managed assets amounted to $16.3 million in 2004, which represents an increase of $4.3 million compared to 2003 as a result of a management incentive fee we received from Lafarge S.A. for exceeding agreed upon performance targets. Gross proceeds from the management of these assets totaled $244.4 million in 2004, as compared to $206.4 million in 2003. Total proceeds included billings for the annual management fee ($16.3 million in 2004 and $12.0 million in 2003), as well as direct payroll, pension and postretirement costs and allocated selling, general and administrative expenses. Expenses associated with management of these assets were $228 million and $194.4 million in 2004 and 2003, respectively. We are fully reimbursed for these expenses under the terms of the management agreement.

Interest Expense

     Interest expense for the year was $48.8 million, $6.0 million lower than last year. The fixed to floating rate interest rate swap we executed in the first quarter of 2004 reduced interest expenses by $4.9 million. In addition, interest expense on our short-term debt borrowings decreased by $1 million versus 2003 due to lower average borrowing levels.

Interest Income

     Interest income for the year was $16.3 million, which represents an increase of $15.2 million compared to 2003. The increase is due to the recognition of lower currency translation losses on U.S. dollar investments in Canada, which favorably impacted the year-over-year comparison by $6.8 million. In addition, we recognized $4.9 million of interest income associated with an income tax receivable and interest income increased by $1.9 million as a result of higher average investment balances.

Income Taxes

     Income tax expense from continuing operations increased to $145.9 million in 2004 from $133.2 million in 2003. Our tax expense was impacted in both 2003 and 2004 by certain unusual items. In 2004, we recorded a tax benefit of $6.3 million. In 2003, we recognized an additional $7.6 million of tax expenses to reflect provincial tax changes legislated in both Ontario and Alberta, as well as the higher tax rate applicable to the sale of the Detroit cement terminal in the third quarter. Excluding these tax adjustments, the effective tax rate for 2004 and 2003 was approximately 35 percent and 36 percent, respectively.

Net Income

     Net income was $295.5 million or $3.86 per diluted share, compared with net income in 2003 of $280.6 million, or $3.79 per diluted share. Current year results included several unusual items that contributed a net benefit of $0.03 per diluted share. These unusual items included a tax benefit of $6.3 million ($0.08 per diluted share), interest income of $4.9 million ($3.2 million after taxes or $0.04 per diluted share) associated with an income tax receivable partially offset by legal expenses of $10.6 million ($6.9 million after taxes or $0.09 per diluted share) related to settled litigation in our cement segment. Prior year results included income from discontinued operations of $66.3 million ($0.90 per diluted

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share), a charge of $3.2 million ($0.04 per diluted share) representing the cumulative effect of a change in accounting principle, a gain of $31.2 million ($18.9 million after taxes or $0.25 per diluted share) from the sale of one of our cement terminals and a charge of $7.6 million ($0.10 per diluted share) associated with provincial tax changes legislated in both Ontario and Alberta as well as the higher tax rate applicable to the sale of the Detroit cement terminal.

YEAR ENDED DECEMBER 31, 2003

Net Sales

     Lafarge’s net sales from continuing operations increased 5 percent in 2003 to $3,318.9 million from $3,160.1 million in 2002. Demand for our products remained solid and we benefited during the third and fourth quarters from the pent up demand that built up during the first half of the year, when market conditions were particularly difficult due to poor weather. Cement, aggregate and gypsum wallboard shipments for the full year were above last year, while shipments of ready-mixed concrete were flat, and asphalt and paving sales fell short of last year. When compared to 2002, our selling prices generally increased, with the exception of the U.S. cement market and our paving business. In addition, net sales benefited from continued strength of the Canadian dollar, which finished the year close to 78 cents per U.S. dollar. Excluding the exchange rate effect, net sales from continuing operations were equal to last year.

     Excluding the favorable exchange rate effect, the increase in cement and gypsum net sales was partially offset by the drop in sales of our aggregates, concrete and asphalt segment. By region, U.S. net sales from continuing operations decreased to $1,882.0 million in 2003 compared to $1,935.3 million in 2002, driven by lower cement and asphalt and paving sales. Canadian net sales increased 17 percent to $1,436.9 million in 2003 (5 percent excluding the favorable exchange rate effect), primarily due to higher cement, aggregate and ready-mixed concrete sales.

   Aggregates, Concrete & Asphalt

     Net sales from the aggregates, concrete and asphalt segment totaled $2,032.5 million in 2003, 5 percent higher than the $1,943.0 million in 2002. Excluding the impact of favorable Canadian exchange rate, net sales were down 2 percent. Stronger sales in construction aggregates were offset by a decline in asphalt and paving sales.

     Net sales of construction aggregates were $614.5 million, 15 percent higher than 2002 (8 percent higher excluding the favorable exchange rate). Shipments of construction aggregates increased 2 percent in 2003 to 118.9 million tons, with U.S. volumes up 7 percent as a result of higher sales in Missouri and New Mexico as well as higher resales in the Great Lakes. Canadian volumes were 3 percent lower than 2002 levels due to lower shipments in most of our Western Canadian markets as well as lower exports to the U.S. west coast. Average selling prices in 2003 were up 4 percent in Canada, in local currency, and 3 percent in the U.S. due in part to a better product mix as well as successful implementation of general price increases in most markets.

     Ready-mixed concrete sales totaled $689.6 million in 2003, up 6 percent from last year (flat to 2002, excluding the favorable exchange rate). Overall ready-mixed concrete shipments fell slightly to 11.0 million cubic yards with stronger demand in Canada offsetting a 12 percent volume decline in Western U.S. markets. The deterioration in the construction economy in Colorado and New Mexico resulted in both lower volume and prices. Canadian volumes increased by 5 percent over 2002, with sustained project work in the energy/mining sector (Montreal and Vancouver). In addition, average Canadian prices (in local currency) increased by 2 percent compared to 2002 to strong project pricing and higher value added sales.

     Asphalt and paving sales totaled $637.8 million in 2003, down 4 percent from 2002 (down 11 percent, excluding the favorable exchange rate). Asphalt and paving volumes were down 6 percent and 14 percent, respectively, in 2003 compared to prior year. Lower volumes in the U.S. were due primarily to weather in the first half of the year, weak construction activity in our principal Western U.S. markets as well as our exit from our Western U.S. portable highway paving business in the second quarter of 2003. Further contributing to lower sales was lower demand in Eastern Canada due to a weather related slow start of the paving season and less asphalt paving content in projects.

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   Cement

     Cement net sales from continuing operations increased 6 percent to $1,198.3 million in 2003 from $1,127.2 million in 2002 (up 3 percent excluding the favorable exchange rate). With strong shipments in the fourth quarter, full year sales volumes from our continuing operations in 2003 reached 13.2 million tons, up 3 percent from 2002. Sales volumes in the U.S. increased a modest 1 percent compared to 2002 while in Canada, sales volumes increased 7 percent as demand was up sharply in the western provinces. Average selling prices in Canada were up 3 percent in local currency, reflecting the impact of general price increases implemented early in the year. Prices in the U.S. declined 1 percent as the planned April price increase met with limited success and some price degradation occurred due to competitive activity in several markets.

   Gypsum

     Net sales from gypsum operations increased by 9 percent to $254.3 million from $232.7 million in 2002, benefiting from strong demand as well as the impact of the price increases implemented in the second half of the year. Sales volume reached 2.1 billion square feet, an increase of 5 percent from 2002, which is in line with the increase in demand reported by the gypsum association for the markets served by our plants. The average mill net price per thousand square feet for the year was $98 compared with $96 in 2002. Prices increased significantly during the fourth quarter 2003 and a further price increase was implemented in January 2004.

Performance by Line of Business

   Aggregates, Concrete & Asphalt

     Our aggregates, concrete and asphalt segment earned $183.7 million on sales of $2.0 billion, down 7 percent from 2002 earnings of $196.8 million on sales of $1.9 billion. The favorable impact of the Canadian dollar, which contributed $10.6 million to reported profit for the year, was more than offset by an $18.7 million dollar increase in pension and other postretirement costs. In addition, losses incurred in our Western U.S. portable highway paving business that we exited in the second quarter of 2003 and lower levels of paving activities in Colorado reduced profits for the year. As a result, operating income as a percentage of net sales was 9 percent in 2003 compared to 10 percent in 2002.

     Construction aggregates recorded an operating income of $123.9 million in 2003, in line with last year, as higher volumes and prices were offset by pension expenses, which increased by $5.9 million, and higher operating costs resulting in part from weather-related inefficiencies.

     Ready-mixed concrete profits declined $6.2 million to $34.7 million in 2003. Most of the shortfall was in the Western U.S. as continued weak market conditions resulted in a 12 percent drop in volumes and competitive price pressures. In Canada, ready-mixed concrete profits were equal to last year as a decline in Eastern Canada, due largely to difficult market conditions in Toronto, was offset by improved profitability in our Western Canadian operations, due to higher volumes in Vancouver and generally higher margins. Our ready-mixed concrete operations were negatively impacted by an annual increase of $5.3 million in pension expense in 2003.

     Asphalt and paving operations earned $30.8 million in 2003, about $7.4 million less than in prior year. Profits in Eastern Canada increased by 39 percent over 2002 as lower costs and improved margins offset lower volumes. Weak market conditions in the Western U.S., combined with losses associated with the portable highway paving operations that we exited during the year, resulted in a significant drop in earnings in that market, more than offsetting the improvement in Eastern Canada. In addition, pension expense for this product line increased $5.3 million in 2003.

   Cement

     Cement operating profit from continuing operations was $290.5 million, in line with last year. The favorable impact of the Canadian dollar was $15.5 million, which offset a $15.3 million increase in pension and other postretirement costs. Higher volumes and higher prices in Canada were partially offset by weaker U.S. prices. In addition, margins declined as most of the increased tonnage sold in the second half of the year came out of inventory rather than incremental production. In terms of operating costs, fixed costs were lower by $3.8 million due to lower maintenance expenses as well as the absence of costs related to the start up of our plant near Kansas City and the Bath strike in 2002. Variable

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costs per ton was down slightly for the year as significant improvement in fuel cost at our Exshaw plant, due to the conversion to coal from natural gas, was largely offset by a reduction in the availability and pricing of fuel quality waste used in some of our plants. Finally, the profitability of our cement-related products business declined in 2003, primarily due to lower slag results and clinker sales volumes. As a result, cement operating income from continuing operations as a percentage of net sales was 24 percent in 2003, which was down from 26 percent in the prior year.

   Gypsum

     Our gypsum drywall operations returned to profitability starting the second half of 2003, as we benefited from continued strong residential demand and higher prices, particularly in the fourth quarter. For the full year, the gypsum operations lost $5.0 million, which represented an improvement of $11.3 million from 2002 due to a combination of improved manufacturing performance as well as price and volume increases. Production volumes from our two newer plants in Kentucky and Florida accounted for 71 percent of total production compared to 62 percent last year. The idling of our Wilmington plant in late 2002 resulted in the anticipated 2003 cost savings of approximately $10 million. However, higher natural gas prices, increased wage rates, higher labor costs related to increased production levels in our remaining plants, as well as increased pension costs and higher depreciation expense offset the Wilmington savings in 2003. The 2002 operating loss of $16.3 million excludes a $26 million charge recorded in “Other (income) expense, net” for the idling of our Wilmington, Delaware plant.

Corporate and Unallocated Expenses

     Corporate and unallocated expenses in 2003 were $57.5 million, which represented a decrease of $13.2 million compared to 2002. The decrease was due to a $31.2 million gain on the sale of the Detroit cement terminal partially offset by a $10.1 million increase in foreign exchange transaction losses and the absence of an $8.1 million credit recognized in 2002 related to a natural gas derivative that did not qualify for hedge accounting. The provision of $26 million recognized in 2002 for the idling of our gypsum drywall plant in Wilmington was offset by a gain on the sale of our Canadian paving stone business in that same year.

Income from Managed Assets

     Income from the managed assets amounted to $12 million in both 2003 and 2002. Gross proceeds from the management of these assets totaled $206.4 million in 2003, compared to $190.8 million in 2002. Total proceeds included billings for the annual management fee ($12.0 million in both years), as well as direct payroll, pension and postretirement costs and allocated selling, general and administrative expenses. Expenses associated with management of these assets were $194.4 million and $178.8 million in 2003 and 2002, respectively. We are fully reimbursed for these expenses under the terms of the management agreement.

Interest Expense

     Interest expense for the year was $54.8 million, up $2.4 million from 2002 due to the absence of $4.0 million of capitalized interest in 2003 and a $1.2 million interest expense increase from a long-term bond issued in June 2003. These were partially offset by a reduction in short-term interest expense due to a combination of lower debt levels and lower interest rates.

Interest Income

     Interest income was $1.1 million, a decrease of $8.6 million from 2002 as foreign exchange losses of $10.5 million on U.S. dollar investments in Canada, due to the devaluation of the U.S. dollar, offset an increase in interest from investments.

Income Taxes

     Income tax expense from continuing operations increased from $93.1 million in 2002 to $133.2 million in 2003, including an $7.6 million tax expense increase in 2003 due to provincial tax changes legislated in both Ontario and Alberta as well as the higher tax rate applicable to the sale of the Detroit cement terminal in the third quarter. The 2002 results benefited from the recognition of approximately $28 million in tax benefits related to the reversal of a deferred tax

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valuation allowance ($23 million) and the favorable final settlement of various tax issues with both U.S. and Canadian authorities ($5 million) in the fourth quarter. Excluding these tax adjustments, the effective tax rate for 2003 was 36 percent compared with approximately 35 percent in 2002.

Net Income

     Net income was $280.6 million, or $3.79 per diluted share, compared with net income in 2002 of $268.4 million or $3.64 per diluted share.

     Net income in 2003 from continuing operations, which excludes the results of the divested Florida operations, was $217.4 million, or $2.93 per diluted share, compared with $256.7 million, or $3.48 per diluted share, in 2002. The 2003 results include a net gain of $11.3 million, or $0.15 per diluted share, related to the increase in the Canadian deferred tax provision and a gain from the sale of our Detroit, Michigan cement terminal. The 2002 results contain a net gain of $28.7 million, or $0.39 per diluted share, from favorable tax adjustments and a gain on the sale of our Canadian paving stone business, offset by a charge for the idling of our gypsum plant in Wilmington, Delaware.

     Net income from discontinued operations for the full year 2003 was $66.3 million, or $0.90 per diluted share (including the divestment gain after tax of $58.0 million, or $0.79 per diluted share), compared with $11.7 million, or $0.16 per diluted share, in 2002.

MANAGEMENT’S DISCUSSION OF CASH FLOWS

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

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

Cash Flows from Operations

     The net cash provided by operations for each of the three years presented reflects our net income adjusted for the net effects of operating transactions and other events that affect net income and operating cash flows in different periods. Significant adjustments are discussed below, except for changes in working capital, which are discussed in Management’s Discussion of Financial Position.

     The non-cash adjustment for depreciation, depletion and amortization in 2004 increased by $18.5 million reflecting new assets placed in service resulting from an increase in capital expenditures ($176.4 million) and the commencement of amortization of certain information technology projects. The non-cash adjustment for depreciation, depletion and amortization in 2003 increased by $10.7 million due to annualization effect of assets put in service in the course of 2002 (mainly the Sugar Creek cement plant and the Chicago slag operation), offset by the change in useful lives of our cement plants in July 2002 (6 month impact of $8.5 million decrease). The non-cash adjustment for gain on sale of assets for 2003 and 2002 was relatively similar ($38.8 million in 2003 and $35.2 million in 2002), as both years were impacted by large divestment gains (Detroit cement terminal in 2003 and paving stone divestiture in Eastern Canada in 2002). The impact of the gain on the sale of discontinued operations (Lafarge Florida Inc.), including related income taxes paid, is shown separately. As a result of improving liquidity, we significantly reduced the amount of securitized receivable financing. The impact of this change reduced the 2004 comparative cash flows from operations by approximately $87 million. The adjustment for “Net change in noncurrent assets and liabilities” primarily reflects the change in pension contributions, which increased by $61.2 million and $45.5 million in 2004 and 2003, respectively.

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Cash Flows from Investing

     In 2004, net cash used for investing activities increased $174.7 million to $258.3 million. Capital expenditures more than doubled during 2004 as compared with 2003, from $173.9 million to $350.3 million, due to $29.7 million of additional capital expenditures associated with our Sugar Creek, Missouri cement plant (see “Note 20 Commitments and Contingencies” to the consolidated financial statements for more information), increased spending on information technology projects, costs associated with the replacement terminal in Detroit, Michigan, and timing factors associated with various projects. Redemption of short-term investments, net, for 2004 was $34.3 million compared to purchases of short-term investments, net in 2003 of $46.3 million, both years reflecting the change in the amount of excess cash in Canada that was invested in short-term investments with original maturities exceeding three months. Proceeds from the sale of non-strategic assets, surplus land and other miscellaneous items totaled $66.6 million in 2004 compared to $71.2 million in 2003. Proceeds for 2004 includes several individually insignificant sale transactions while proceeds from 2003 include $38.2 million from the sale of the Detroit cement terminal.

     In 2003, net cash used for investing decreased $107.7 million compared to 2002. Capital expenditures decreased $74.0 million in 2003 largely because ongoing development projects, such as the construction of the Sugar Creek, Missouri plant and Chicago slag project, were completed in 2002. Spending on acquisitions decreased $14.8 million to $16.7 million as only a few small acquisitions were made. Purchases of short-term investments, net, for 2003 was $46.3 million compared to redemptions of short-term investments, net for 2002 of $1.0 million, both years reflecting the change in the amount of excess cash in Canada that was invested in short-term investments with original maturities exceeding three months. Proceeds from the sale of non-strategic assets, surplus land and other miscellaneous items totaled $71.2 million in 2003 compared to $77.0 million in 2002, as both years had significant proceeds related to the Detroit cement terminal (in 2003) and paving stone divestiture in eastern Canada (in 2002) in addition to the routine sales of surplus land and retail mobile equipment. The proceeds from the sale of discontinued operations of $123.9 million (Lafarge Florida Inc.), and related income taxes paid, are shown separately.

Cash Flows from Financing

     In 2004, net cash provided by financing was $63.4 million compared to net cash used by financing activities of $126.2 million in 2003. The change reflects an increase in short-term borrowings in 2004 whereas we repaid short-term borrowings in 2003. Repayments were made in 2003 utilizing cash proceeds received in connection with the two large asset dispositions noted above. Issuance of long-term debt for 2003 includes $47.0 million of proceeds received in connection with the issuance of industrial revenue bonds related to our Sugar Creek, Missouri plant. Also, proceeds from issuance of equity securities increased to $52.3 million in 2004 from $11.8 million in 2003 due to more employee stock option exercises in 2004.

     In 2003, net cash consumed by financing was $126.2 million compared to $85.8 million in 2002. This increase of $40.4 million resulted from the net repayment of short-term borrowings of $131.1 million in 2003 versus net repayment of only $65.4 million in 2002, an increase in dividends of $6.4 million and a decrease in the issuance of equity securities of $19.5 million, offset by an increase in long-term debt mainly due to the issuance of the industrial revenue bonds discussed above.

     We have access to a wide variety of short-term and long-term financing alternatives in both the U.S. and Canada. These include a commercial paper facility under which we may from time to time issue up to an aggregate principal amount of $300 million in unsecured, short-term promissory notes through private placements. The facility is 100 percent backed by a syndicated, multi-year committed bank revolver, which expires in April 2007. Commercial paper borrowings as of December 31, 2004 and 2003 were $90 million and zero, respectively. We also have a syndicated $300 million multi-year committed bank revolver maturing in April 2007. At December 31, 2004 and 2003, no amounts were outstanding under the committed bank revolver.

     We also have a receivables securitization program to provide a cost-effective source of working capital and short-term financing. Under the program, we agreed to transfer, on a revolving basis, an undivided percentage ownership interest in a designated pool of accounts receivable to unrelated third-party purchasers up to a maximum of $200 million. Under the agreements, new receivables are added to the pool as collections reduce previously sold receivables. We service, administer and collect the receivables sold, which as of December 31, 2004 and 2003, were zero and

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$82.0 million, respectively. Since this program is accounted for as a sale of receivables, the related cash flows are included in net cash provided by operations.

     In 2004, the strengthening of the Canadian dollar resulted in a positive effect of $50.7 million on the cash-flow statement, directly related to the impact of exchange rate changes on the cash in Canada.

MANAGEMENT’S DISCUSSION OF FINANCIAL POSITION

     The Consolidated Balance Sheets summarize our financial position at December 31, 2004 and 2003.

     We are exposed to foreign currency exchange rate risk inherent in our Canadian revenues, expenses, assets and liabilities denominated in Canadian dollars, as well as interest rate risk inherent in our debt. The value reported for Canadian dollar denominated net assets increased from December 31, 2003 as a result of a rise in the value of the Canadian dollar relative to the U.S. dollar. At December 31, 2004, the U.S. dollar equivalent of a Canadian dollar was $0.83 versus $0.78 at December 31, 2003. Based on 2004 results, if the value of the Canadian dollar relative to the U.S. dollar changed by 10 percent, our consolidated net assets and net income each would change by approximately 6 percent.

     Working capital, excluding cash, short-term investments, short-term borrowings, redeemable preferred stock, current portion of long-term debt and the impact of exchange rate changes ($50.8 million increase), increased $140.3 million from December 31, 2003 to December 31, 2004. Receivables, net (including “Due from affiliates”), excluding an exchange rate increase of $21.0 million, increased $166.2 million primarily due to a decrease in receivables sold under our securitization program and increased sales. Inventories decreased $28.3 million, excluding the exchange rate increase of $11.7 million, due to increased levels of sales in the fourth quarter of 2004 compared to 2003. Accounts payable and accrued liabilities, excluding the exchange rate increase of $14.4 million, decreased $14.8 million mainly due to a decrease in amounts payable under our receivable sales agreement. Income taxes payable increased $17.7 million due to stronger earnings in the fourth quarter, which resulted in higher income taxes payable.

     Net property, plant and equipment increased $77.8 million during 2004, excluding the exchange rate increase of $59.1 million, as capital expenditures outpaced depreciation. No significant acquisitions were made in 2004. Goodwill relates primarily to the Redland, Warren and Presque Isle transactions.

     Our operating cash flows are generally sufficient to provide all of the cash operating requirements, including capital expenditures, on an annual basis, although short-term debt to fund seasonal working capital needs and operating losses is incurred during the first six months of the year. We maintain sufficient liquidity resources, including a $300 million commercial paper line, a $200 million accounts receivable securitization line, a committed $300 million multi-year revolver, a bi-lateral committed facility of $50 million, and over $100 million in uncommitted bi-lateral bank facilities, to ensure that our cash requirements are met under any circumstances. A $250 million bond, issued in 1998 to fund an acquisition, will mature in July 2005. At maturity, we intend to use internal cash, short-term debt capacity, or a combination thereof, to repay the bond.

     As noted above, we decided that we will repatriate almost $1.1 billion of Canadian earnings under the repatriation provisions of the Jobs Act. Repatriation will substantially increase liquidity in the United States, although use of the additional liquidity would be restricted by the domestic reinvestment plan required by the Jobs Act. There will be a corresponding reduction in liquidity at our Lafarge Canada Inc. (“LCI”) subsidiary. LCI may be required to borrow in order to repatriate their earnings to the U.S. In addition, beginning on December 29, 2005, Canadian $166.4 million (approximately U.S. $138.1 million) in preferred shares issued by a Canadian subsidiary in 2000, in connection with our acquisition of the Warren Paving and Materials Group, will be redeemable at the option of the holder. We also may be required to borrow if the holder of the preferred shares elects to redeem these shares. We expect our significant positive Canadian cash flows would be sufficient to repay any debt and replenish Canadian cash balances over time.

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CONTRACTUAL OBLIGATIONS

     Our summary of contractual obligations and maturities as of December 31, 2004 is as follows (in thousands):

(a)

Excludes interest.

     The amounts set forth in the table above for noncapital purchase obligations relate primarily to contractual purchase obligations related to gas, power, fuel and other significant raw material commitments as well as mineral royalties. In addition, we are required to make contributions to certain defined benefit plans. Our estimated 2005 contributions total $41.7 million. Due to uncertainties regarding significant assumptions involved in estimating future contributions, such as interest rate levels and the amount and timing of asset returns, we are unable to reasonably estimate our future contributions beyond 2005. We also have a number of contracts containing commitments or contingent obligations that are not material to our earnings. These contracts are discrete in nature, and it is unlikely that the various contingencies within the contract would be triggered by a common event. The future payments under these contracts are not included in the table set forth above.

     We do not have any off-balance sheet arrangements that have, or are reasonably likely to have a current or future material effect on our financial condition, liquidity or results of operations.

MANAGEMENT’S DISCUSSION OF SHAREHOLDERS’ EQUITY

     The Consolidated Statements of Shareholders’ Equity summarize the activity in each component of shareholders’ equity for the three years presented. In 2004, shareholders’ equity increased by $453.2 million, mainly from net income of $295.5 million, a change in the foreign currency translation adjustment of $124.5 million (resulting from a 7 percent increase in the value of the Canadian dollar relative to the U.S. dollar), the reduction to accumulated other comprehensive loss for $73.2 million related to the minimum pension liability and the exercise of stock options resulting in an increase of $47.2 million. These were partially offset by share repurchases of $49.1 million and dividend payments, net of reinvestments, of $44.2 million.

     In 2003, shareholders’ equity increased by $500.0 million, mainly from net income of $280.6 million, a change in the foreign currency translation adjustment of $276.8 million (resulting from a 22 percent increase in the value of the Canadian dollar relative to the U.S. dollar), and the exercise of stock options resulting in an increase of $7.7 million. These were partially offset by dividend payments, net of reinvestments, of $45.6 million, and an increase to accumulated other comprehensive loss for $36.9 million related to the minimum pension liability.

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

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     The following table reflects the range of high and low closing prices of Common Stock by quarter for 2004 and 2003 as quoted on the New York Stock Exchange:

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

     As of the third quarter of 2004, the dividend rate was changed from 20 cents to 22 cents per share per quarter.

OTHER FACTORS AFFECTING THE COMPANY

Critical Accounting Policies and Estimates

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

     Goodwill – On January 1, 2002, we adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that goodwill be reviewed annually (or more frequently if impairment indicators arise) for impairment. In our goodwill impairment test, we use a combination of a market approach and an income approach when determining the fair value of our reporting units. In the market approach, we compare our reporting units with similar businesses, business ownership interests or manufacturing facilities that have been sold. In the income approach, we estimate the discounted value of the expected future cash flows that we expect our reporting units to generate based on our budgets and projections. Similar to our review for impairment of long-lived assets, evaluations for impairment are significantly impacted by estimates of future prices for our products, the evolution of expenses, economic trends in the construction sector and other factors.

     Pension Plans and Other Postretirement Benefits – The accounting for pension plans and other postretirement benefits requires us to make certain assumptions that have a significant impact on the expenses and liabilities that we record for pension plans and other postretirement benefits.

     The primary assumptions made to account for pension plan and other postretirement benefit expenses and liabilities are disclosed in “Note 19 Pension Plan and Other Postretirement Benefits” of the consolidated financial statements.

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     The assumption for the expected long-term rate of investment return on pension plan assets is based on historical performance, current and long-term outlook and the asset mix in the pension trust funds. The discount rates reflect the rate of long-term high-grade corporate bonds.

     The 2004 pension plan and other postretirement benefit expenses are impacted by the year-end 2003 assumptions for the discount rate and the return rate on assets (pension plan only). If the 2003 discount rate assumption had been lowered by one percentage point, 2004 pension plan and other postretirement benefit expenses would have increased by approximately $18.5 million. If the 2003 asset returns rate assumption had been lowered by one percentage point, 2004 pension plan expenses would have increased by approximately $7.9 million.

     The pension and other postretirement accumulated benefit obligations are impacted by the 2004 discount rate. The impact of decreasing the discount rate assumption by one percentage point as of November 30, 2004 would have been to increase the total accumulated benefit obligation as of December 31, 2004 by approximately $148.0 million, and would have increased the additional minimum pension liability amount by approximately $219.4 million.

     Impairment or Disposal of Long-Lived Assets – We evaluate the recoverability of our long-lived assets in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Such evaluations for impairment are significantly impacted by estimates of future prices for our products, capital needs, economic trends in the construction sector and other factors. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of by sale are reflected at the lower of their carrying amount or fair value less cost to sell.

     We did not identify any impairment during 2004 and 2003. In November 2002, an impairment charge was recognized in relation to the idling of the gypsum drywall plant in Wilmington, Delaware. This resulted in a $15 million asset write-off.

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

     Revenue Recognition – Revenue from the sale of cement, cement-related products, aggregates, ready-mixed concrete, concrete products, asphalt and gypsum drywall is recorded when title and ownership are transferred upon delivery of the products. Revenue from waste recovery and disposal is recognized when the material is received, tested and accepted. Revenue from road construction contracts is recognized on the basis of units of work completed, while revenue from other indivisible lump sum contracts is recognized using the cost-to-cost method to determine the percentage-of-completion. Amounts billed to a customer in a sales transaction related to shipping and handling are included in “Net Sales,” and costs incurred by us for shipping and handling are classified as “Cost of goods sold.”

Inflation

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

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Environmental Matters

     Our operations, like those of our competitors, are subject to federal, state, provincial and local environmental laws and regulations that impose liability for cleanup or remediation of environmental pollution and hazardous waste, require pollution control and prevention measures to be undertaken and require certain permits and approvals for us to conduct many of our operations. As a consequence, we maintain an environmental program designed to monitor and control environmental matters relevant to us, including changes in applicable laws and regulations as well as instances where corrective action may be needed. We recruit, employ and train personnel experienced in environmental matters who are responsible for identifying developments relating to environmental matters and bringing them to management’s attention, including emergency reporting and quarterly reporting of environmental matters. We routinely audit our properties to determine whether environmental remediation may be required, the amount of any necessary related provisions, the status of remedial activities undertaken and whether improvements may be required to meet current and future environmental requirements.

     We may capitalize environmental expenditures that extend the life, increase the capacity, improve the safety or efficiency of assets or that are incurred to mitigate or prevent future environmental contamination. We expense other environmental costs when incurred. Our environmental capital expenditures and expenses were not material for the years ended December 31, 2004, 2003 and 2002 and we do not believe that the ultimate resolution of our known environmental contingencies, for which we have recorded provisions for estimated probable liabilities, will have a material adverse effect on our financial condition, results of operations or liquidity. However, our environmental expenditures have increased over time and are likely to increase in the future. Changes to existing or new environmental laws or regulations, or interpretations thereof, may impose substantial further environmental obligations on us. Such changes may include: revised EPA Boiler and Industrial Furnaces regulations; final residual risk or maximum achievable control technology provisions governing air toxic emissions; cement kiln dust management standards or programs; revised state implementation plans regarding NO_x reductions; revised state implementation plans regarding reduction of fine particulate matter particles; federal “major source” permit requirements; and implementation of the Kyoto Protocol. We cannot presently determine the effect such changes may have on us, including the nature and amount of any required capital expenditures or other remedial actions, or on our financial condition, results of operations or liquidity.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to certain commodity price, interest rate and foreign currency risks. We have defined strict policies and procedures to measure, manage and monitor our market risk exposures. Our policies do not permit any speculative market position.

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

  Commodity Price Risk

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

     By using derivative financial instruments to hedge exposures to changes in commodity prices, we are exposed to credit risk and market risk. Credit risk is the failure of the counter party to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counter party owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counter party and, therefore, do not have a credit risk. We minimize the credit risk in derivative instruments by entering into transactions only with what we believe are low credit risk counter parties.

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     Market risk is the adverse effect on the value of a financial instrument that results from a change in commodity prices. We manage market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. As such, a 10 percent change in the commodity prices for hedged items would cause a change on our December 31, 2004 consolidated net assets and the 2004 consolidated other comprehensive income by less than $1.6 million, net of any other impact. Such a change would have no impact on net income as our derivatives qualify as cash flow hedges with the effective portion of the fair value change reported as a component of “Accumulated Other Comprehensive Income/(Loss).”

   Foreign Currency Risk

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

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

     At December 31, 2004 and for the year then ended, approximately 63 percent of our consolidated net assets and 60 percent of consolidated net income was attributable to subsidiaries that prepare their financial statements in Canadian dollars. As such, a 10 percent change in the U.S. dollar/Canadian dollar exchange rate would cause a change on consolidated net assets and consolidated net income by approximately $195 million and $18 million, net of any other impact, respectively.

     Transaction Risk – We are subject to limited foreign currency exchange risks as a consequence of commercial exposures related to purchase and sale transactions in currencies other than our operating currencies. Our exposure to changes in foreign currency exchange risks related to transactions is not material.

   Interest Rate Risk

     We are exposed to interest rate risk through our debt. We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

     In February 2004, we entered into a $200 million interest rate swap which effectively converts our $200 million bond, maturing in July 2013, from a fixed rate coupon of 6.9 percent to a floating rate coupon at six month LIBOR plus a fixed spread of 2.43 percent. At December 31 2004 we had no other derivative instruments related to interest rates.

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

     Price risk for fixed-rate financial assets and liabilities – By contracting a fixed-rate liability, for example, we are exposed to an opportunity cost in the event of a fall in interest rates. Changes in interest rates impact the market value of fixed-rate assets and liabilities, leaving the associated financial income or expense unchanged. At December 31, 2004 and after giving effect to the interest rate swap noted above, 61 percent of our consolidated indebtedness was contracted at fixed rates.

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

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     We use variable-rate debt to finance our operations. At December 31, 2004, approximately 39 percent of our consolidated indebtedness was at variable rates, which exposes us to variability in interest payments due to changes in interest rates. As such, a one percent change in the average interest rate would have caused a change in 2004 consolidated net income by approximately $2.1 million, net of any other impact.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE

     All other schedules are omitted because they are not applicable.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Lafarge North America Inc.:

     We have audited the accompanying consolidated balance sheets of Lafarge North America Inc. (a Maryland corporation) and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, comprehensive income and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 Lafarge North America Inc. and subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

     As discussed in Note 1 to the consolidated financial statements, in 2003 the Company changed its method of accounting for asset retirement obligations. Also, as discussed in Note 19 to the consolidated financial statements, the Company changed the date used to measure pension and other postretirement benefit plan assets and obligations.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Lafarge North America Inc.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 4, 2005 expressed an unqualified opinion thereon.

McLean, Virginia
February 4, 2005

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)

See the Notes to Consolidated Financial Statements.

35

LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except amounts per share)

See the Notes to Consolidated Financial Statements.

36

LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)

See the Notes to Consolidated Financial Statements

37

LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

See the Notes to Consolidated Financial Statements.

38

LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

See the Notes to Consolidated Financial Statements.

39

LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Lafarge North America Inc., together with its subsidiaries, is the largest diversified supplier of construction materials in the U.S. and Canada. We produce and sell cement, ready-mixed concrete, gypsum wallboard, aggregates, asphalt, and related products and services. Our products are used in residential, commercial and public works construction projects across North America. Our business is organized into three operating segments: Aggregates, Concrete & Asphalt; Cement; and Gypsum. Each represents a separately managed strategic business unit with different capital requirements and marketing strategies. For information regarding our operating segments and products, see “Note 17 Segment and Related Information” herein.

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

     We are party to an agreement with Lafarge S.A. to manage and operate certain U.S. cement, aggregates and concrete businesses owned by them as a result of their 2001 acquisition of U.K.-based Blue Circle Industries PLC (the “Blue Circle Asset Management Agreement”). For managing these businesses we receive $12 million annually plus potential incentives for improving their operating results. As of December 31, 2004, these businesses include 5 full production cement manufacturing plants, 15 cement terminals, 1 slag grinding facility, 15 aggregate-producing pits and quarries, 100 ready-mixed concrete plants and 10 concrete block plants which we manage in conjunction with our own to maximize the efficiency of our respective operations. We are reimbursed our direct costs and expenses for managing these businesses, as well as for the selling, general and administrative costs allocated to them. We are also reimbursed for payroll and other related costs and expenses we incur associated with the employees who operate the managed assets. If our agreement with Lafarge S.A. to manage these businesses terminates, these employees are to be returned to the employment of the Blue Circle entities and we are to be reimbursed for any cost, expense or financial consequence arising from the structural separation of our respective operations. Unless terminated at least six months in advance, our agreement to manage these assets renews annually. Our option to acquire these assets from Lafarge S.A. expired unexercised on December 31, 2004.

Note 1 Summary of Significant Accounting Policies

   Basis of Presentation

     The consolidated financial statements include the accounts of Lafarge and all of its wholly and majority-owned subsidiaries, after the elimination of intercompany balances and transactions. Investments in affiliates in which we have less than a majority ownership, or where we cannot exercise operating control, are accounted for by the equity method and included in “Other assets, net” in the Consolidated Balance Sheets. As used in these Notes to Consolidated Financial Statements, the terms “Lafarge,” “company,” “we,” “us,” “our” and similar terms refer to Lafarge North America Inc. and its subsidiaries. Certain reclassifications have been made to prior years to conform to the 2004 presentation.

   Estimates

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

   Foreign Currency Translation

     Lafarge uses the U.S. dollar as our functional currency for operations in the U.S. and the Canadian dollar for LCI. The assets and liabilities of LCI are translated at the exchange rate prevailing at the balance sheet date. Related revenue and expense accounts for LCI are translated using the average exchange rate during the year. Cumulative foreign

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

currency translation adjustments of $226.9 million and $102.4 million at December 31, 2004 and 2003, respectively, are included in “Accumulated other comprehensive income/(loss)” in the Consolidated Balance Sheets and in the Consolidated Statements of Shareholders’ Equity.

   Cash Equivalents and Short-term Investments

     Cash equivalents and short-term investments consist of liquid investments including commercial paper and bank time deposits. Investments purchased with an original maturity of three months or less are classified as cash equivalents. Investments purchased with an original maturity between three months and one year are classified as short-term investments. Investments underlying our cash equivalents and short-term investments are classified as “available-for-sale” in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Such investments are carried at amortized cost, which approximates fair value due to their short period of time to maturity.

   Derivative Instruments and Hedging Activities

     We apply the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Certain Hedging Activities” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of SFAS 133.” SFAS No. 133, as amended, requires that all derivative instruments be recorded on the balance sheet at their respective fair values.

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

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

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

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   Concentration of Credit Risk

     Financial instruments that potentially subject us to concentrations of credit risk are primarily cash equivalents, short-term investments, receivables and derivatives. We place our cash equivalents and short-term investments primarily in investment grade, short-term debt instruments. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral from our customers. The allowances for non-collection of receivables are based upon analysis of economic trends in the construction industry, detailed analysis of the expected collectibility of accounts receivable that are past due and the expected collectibility of overall receivables.

   Inventories

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

   Property, Plant and Equipment

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

   Goodwill and Intangible Assets

     On January 1, 2002, we fully adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that goodwill and intangible assets with indefinite lives be reviewed annually (or more frequently if impairment indicators arise) for impairment. Intangible assets that are deemed to have definite lives are amortized over their useful lives. The weighted average useful life for each category of intangible assets is as follows: capitalized software – 5 years; customer lists – 10.3 years; and non-compete contracts – 6.7 years.

   Impairment or Disposal of Long-Lived Assets

     We evaluate the recoverability of our long-lived assets in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Such evaluations for impairment are significantly impacted by estimates of future prices for our products, capital needs, economic trends in the construction sector and other factors. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of by sale are reflected at the lower of their carrying amount or fair value less cost to sell.

     On November 22, 2002, we ceased manufacturing operations at our gypsum drywall plant in Wilmington, Delaware. The customer base continues to be served predominantly from newer, more efficient plants in the Eastern U.S. In connection with this announcement in 2002, we recorded as a component of “Other (income) expense, net” a pretax charge to earnings of approximately $26 million, which included $15 million for the write-off and impairment of assets in accordance with SFAS No. 144, and, in accordance with EITF 94-3 “Liability Recognition for Costs to Exit an Activity,” approximately $2.6 million for the termination of approximately 100 hourly and salaried employees and approximately $8.4 million for costs to retire the property. The fair value of impaired assets was determined using the expected net realizable value. As of December 31, 2004, 2003 and 2002, cumulative payments of approximately $9.9 million, $4.7 million and $1.0 million, respectively, had been made against the liability of $11 million. The remaining liability as of December 31, 2004 is $1.1 million.

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LAFARGE NORTH AMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

     No other impairments were recorded for the years ended December 31, 2004, 2003 and 2002.

   Asset Retirement Obligations