FORM 10-Q

                  SECURITIES AND EXCHANGE COMMISSION
                       Washington, D. C.  20549

(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1996
                                 OR
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number 1-06124

                      LONE STAR INDUSTRIES, INC.
        (Exact name of registrant as specified in its charter)
                                 	
			   DELAWARE    				  No. 13-0982660
         (State or other jurisdiction of		 (I.R.S. Employer
	    incorporation or organization) 		Identification No.)

 300 First Stamford Place, P. O. Box 120014, Stamford, CT  06912-0014
        (Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code   203-969-8600

Indicate by check mark whether the registrant (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 registrant was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 
days.

                   Yes   X             No       

Indicate by check mark whether the registrant has filed all documents 
and reports required to be filed by Sections 12, 13 or 15(d) of the 
Securities Exchange Act of 1934 subsequent to the distribution of 
securities under a plan confirmed by a court.

                   Yes   X             No       

The number of shares outstanding of each of the registrant's classes 
of common stock as of November 4, 1996:

       Common Stock, par value $1 per share - 10,637,158 shares
 



 

 






TABLE OF CONTENTS


	
												PAGE


PART I.	FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
Consolidated Statements of Operations - For the
   Three and Nine Months Ended September 30, 1996 and 
   1995 (Unaudited)......................................3

Consolidated Statements of Retained Earnings -            
   For the Three and Nine Months Ended September 30, 1996 
   and 1995 (Unaudited)..................................4 

Consolidated Balance Sheets - September 30, 1996
   (Unaudited) and December 31, 1995.....................5

Consolidated Statements of Cash Flows - For the 
   Nine Months Ended September 30, 1996 and 1995
   (Unaudited)...........................................6

Notes to Unaudited Consolidated Financial Statements.....7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........14

PART II.	OTHER INFORMATION.......................................19

SIGNATURES.........................................................20





2




PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Amounts)


                                For the Three Months      For the Nine Months
                                 Ended September 30,       Ended September 30,
			                1996          1995         1996          1995     
Revenues:                                                           
                                                                    
 Net sales                      $118,349    $100,611      $273,643      $240,875
 Joint venture income              2,967       2,734         5,444         4,958
 Other income, net                   701       1,399         2,924         3,209
                                 122,017     104,744       282,011       249,042
                                                                     
Deductions from revenues:                                           
 Cost of sales                    69,388      63,022       178,966       164,805
 Selling, general and                                                
  administrative expenses          6,606       6,521        20,866        21,774
 Depreciation and depletion        6,088       6,258        17,822        17,995
 Interest expense                  1,664       2,220         5,210         6,897
                                  83,746      78,021       222,864       211,471
                                                                     
Income before income                                                
 taxes                            38,271      26,723        59,147        37,571
 Provision for income taxes      (12,925)     (8,601)      (19,814)     (12,398)
                                                                    
Net income applicable                                        
 to common stock                $ 25,346    $ 18,122      $ 39,333      $ 25,173
                                                                    
Weighted average common
 shares outstanding               11,369      12,068        11,424        12,068

Primary income per common                                        
 share                             $1.86       $1.30         $2.91         $1.88
                                                                      
Fully diluted income                                           
  per common share                 $1.86       $1.30         $2.90         $1.86
                                                                              

The accompanying Notes to Unaudited Consolidated Financial Statements are an 
integral part of the Financial Statements.















LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Unaudited)
(In Thousands)


							
                                     
                                For the Three Months       For the Nine Months 
                                 Ended September 30,        Ended September 30,
                                 1996          1995         1996          1995 
                                                                     
Retained earnings, beginning                                         
 of period                     $  76,157   $  35,780    $   63,315     $  29,333
                                                                     
Net income                        25,346      18,122        39,333        25,173
Dividends                           (568)       (603)       (1,713)      (1,207)
                                                                      
Retained earnings, end of 
 period                        $ 100,935    $ 53,299    $  100,935     $  53,299
                                                                    

The accompanying Notes to Unaudited Consolidated Financial Statements are an 
integral part of the Financial Statements.





















LONE STAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)


                                                    September 30, December 31,
                                                        1996           1995
                                                    (Unaudited)           
Assets:                                                           
  Current assets:                                                   
    Cash, including cash equivalents of $54,624
     and $47,323                                     $ 58,308        $ 50,049
    Accounts and notes receivable, net                 48,191          31,403
    Inventories:                                                     
       Finished goods                                  21,718          27,392
       Work in process and raw materials                7,292           6,812
       Supplies and fuel                               22,361          21,272
                                                       51,371          55,476

    Deferred tax asset                                 10,000            -
    Other current assets                                4,067           5,289
       Total current assets                           171,937         142,217
                                                                           
  Joint ventures                                       20,721          21,152

  Property, plant and equipment                       376,171         349,052
  Less accumulated depreciation and depletion          54,984          37,655
                                                      321,187         311,397

  Deferred tax asset                                   27,405            -
  Other assets and deferred charges                     8,256           1,761
       Total assets other than liquidating 
        subsidiary                                    549,506         476,527   
                                                                 
  Assets of liquidating subsidiary (See Note 8)          -              4,399
       Total assets                                  $549,506        $480,926

Liabilities and Shareholders' Equity:                              
  Current liabilities:                                               
    Accounts payable                                 $ 10,815        $ 11,183
    Accrued liabilities                                40,815          47,320
    Other current liabilities                           1,970           2,064
       Total current liabilities                       53,600          60,567
                                                                 
  Senior notes payable                                 78,000          78,000
  Postretirement benefits other than pensions         131,212         131,226
  Pensions                                               -              6,770
  Deferred income taxes                                 6,688           6,688
  Other liabilities                                    32,383          33,536
  Contingencies (Notes 9 and 10)                    
       Total liabilities other than liquidating 
        subsidiary                                    301,883         316,787

  Asset proceeds notes of liquidating subsidiary                             
   (See Note 8)                                          -              4,399
                                                    
       Total liabilities                              301,883         321,186

Shareholders' Equity:                                                         
  Common stock                                         12,085          12,081
  Warrants to purchase common stock                    15,579          15,597
  Additional paid-in capital                          139,334          82,709
  Retained earnings                                   100,935          63,315 
  Treasury stock, at cost                             (20,310)        (13,962)
       Total shareholders' equity                     247,623         159,740
       Total liabilities and shareholders'                           
        equity                                       $549,506        $480,926
                                                                 
                           
The accompanying Notes to Unaudited Consolidated Financial Statements are an 
integral part of the Financial Statements.

 


LONE STAR INDUSTRIES, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)

                                            For the Nine Months
                                             Ended September 30,
                                             1996          1995   
                                                                    
Cash Flows from Operating Activities:                                
                                                                    
Net income                                 $  39,333     $  25,173
Adjustments to arrive at net cash
 provided by operating activities:                                          
    Depreciation and depletion                17,822        17,996
    Tax benefit realized from utilization
      of predecessor company deferred tax
      assets                                  19,814        12,398
    Changes in operating assets and                                 
      liabilities:                                                  
        Accounts and notes receivable        (16,986)      (13,484)
        Inventories and other current                               
          assets                               5,984       (11,165)
        Accounts payable and                                    
          accrued liabilities                 (6,761)       (5,887)
    Equity income, net of dividends
      received                                   556        (3,708)
    Pension funding in excess of expense     (13,345)       (3,668)
    Other, net                                   169         2,088
Net cash provided by operating                               
  activities                                  46,586        19,743
                                                                     

Cash Flows from Investing Activities:                               
                                                                    
Capital expenditures                         (29,765)      (26,563)
Proceeds from sales of assets                     81         1,516
Other, net                                        32           -        
Net cash used by investing                                
  activities                                 (29,652)      (25,047)
                                                                     
Cash Flows from Financing Activities:                               
                                                                    
Exercise of warrants                              86            55
Purchase of treasury stock                    (8,191)          (84)
Dividends paid                                (1,713)       (1,207)
Proceeds from exercise of options              1,143         1,076
Reduction of production payment                 -           (3,000)
Net cash used by financing activities         (8,675)       (3,160)
                                                                               
Net increase (decrease) in cash and                             
  cash equivalents                             8,259        (8,464)
                                                                    
Cash and cash equivalents, beginning of                             
  period                                      50,049        55,398
Cash and cash equivalents, end of period   $  58,308     $  46,934
                                                                                


The accompanying Notes to Unaudited Consolidated Financial Statements are an 
integral part of the Financial Statements.
    





	NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Note 1

In the opinion of management, the accompanying unaudited consolidated 
financial statements contain all adjustments necessary to present fairly 
the financial position of the Company as of September 30, 1996, and the 
results of operations for the three and nine months ended September 30, 
1996 and 1995, and the cash flows for the nine months ended September 30, 
1996 and 1995. 

The year-end consolidated balance sheet was derived from the Company's 
audited financial statements, but does not include all disclosures 
required by generally accepted accounting principles.  The financial 
statements contained herein should be read in conjunction with the 
financial statements and related notes in the Company's annual report on 
Form 10-K for the year ended December 31, 1995. The Company's operations 
are seasonal and, consequently, interim results are not indicative of the 
results to be expected for a full year.

In accordance with AICPA Statement of Position No. 90-7, "Financial Reporting 
by Entities in Reorganization Under the Bankruptcy Code" ("SOP No. 90-7"), 
income tax benefits realized from preconfirmation deferred tax assets were 
used first to eliminate the reorganization value in excess of amounts 
allocable to identifiable assets and then used to increase additional paid-in 
capital  (See Note 6).


Note 2 - Common Stock 

In February, May and August 1996 the Board of Directors declared $0.05 
dividends per common share, which were paid on March 15, 1996, June 15, 1996 
and September 16, 1996 to shareholders of record as of March 1, 1996, June 1, 
1996 and September 1, 1996.

As part of its stock repurchase program, in the first nine months of 1996 the 
Company purchased in open market transactions 263,600 shares of treasury 
stock at a total cost of $8,175,000.  In October 1996, the Company purchased 
an additional 8,800 shares of treasury stock in open market transactions at a 
cost of $282,000 and 700,000 shares of its common stock in private 
transactions for $25,200,000.

In October 1996, the Company's credit agreement was amended to increase the 
allowed stock repurchases by an additional $20,000,000.


Note 3 - Supplemental Disclosures of Cash Flow Information

Cash equivalents include the Company's marketable securities which are 
comprised of short-term, highly liquid investments with original maturities 
of three months or less.  Interest paid during the nine months ended 
September 30, 1996 and 1995 was $7,899,000 and $9,042,000, respectively.  
Income taxes paid during the nine months ended September 30, 1996 and 1995, 
were $293,000 and $114,000, respectively.


Note 4 - Interest

Interest expense of $1,982,000, $5,948,000, $2,317,000 and $7,055,000 has 
been accrued for the three and nine months ended September 30, 1996 and 1995, 
respectively. Interest capitalized during the three and nine months ended 
September 30, 1996 and 1995, was $318,000, $738,000, $97,000 and $158,000, 
respectively.


Note 5 - Earnings Per Share

Due to the Company having outstanding common stock equivalents in excess of 
20% of the number of shares of outstanding common stock, primary and fully 
diluted earnings per share of the Company are calculated using the modified 
treasury stock method in accordance with Accounting Principles Board Opinion 
No. 15, "Earnings per Share", except when primary and fully diluted earnings 
per share are anti-dilutive.  Primary earnings per share for the three months 
ended September 30, 1996 and 1995 were calculated based on adjusted weighted 
average shares outstanding of 13,708,843 and 14,295,932 and net income of 
$25,566,000 and $18,618,000, respectively.  Primary earnings per share for 
the nine months ended September 30, 1996 and 1995 were calculated based on 
adjusted weighted average shares outstanding of 13,787,591 and 14,296,526 and 
net income of $40,102,000 and $26,872,000, respectively.


Note 6 - Deferred Tax Asset

As of December 31, 1995, the Company had various deferred tax assets, net of 
deferred tax liabilities, of approximately $98,000,000.  These tax assets 
were made up primarily of the expected future tax benefit of net operating 
loss carryforwards, various credit carryforwards and reserves not yet 
deductible for tax purposes.  A valuation allowance was provided in full 
against these net deferred tax assets upon the Company's emergence from 
bankruptcy when fresh-start reporting was adopted.

During the first six months of 1996, $6,889,000 of pre-bankruptcy tax 
benefits were utilized allowing for a reduction in the valuation allowance 
previously applied against these assets.  This reduction has been recorded as 
an increase to paid-in capital in accordance with the provisions of AICPA SOP 
No. 90-7.

In the second quarter of 1996, the Company further reduced the valuation 
allowance related to the remaining net tax assets by $50,000,000.  The 
reduction reflects the Company's expectation that it is more likely than not 
that it will generate at least enough future taxable income to utilize this 
amount of net deferred tax assets.  The benefit from this reduction is 
recorded as an addition to paid-in capital in accordance with SOP 90-7.

During the third quarter of 1996, an additional $12,925,000 of pre-bankruptcy 
tax benefits were utilized, and were recorded as a reduction of the deferred 
tax asset.


Note 7 - Pension Plans

In September 1996, the Company contributed $10,354,000 to its pension plans. 
As a result, the Pension Benefit Guaranty Corporation has released its 
mortgage on the Company's Oglesby, Illinois cement plant and its security 
interest in the Kosmos Cement Company partnership.


Note 8 - Rosebud Holdings, Inc. Liquidating Subsidiary

In connection with its emergence from bankruptcy proceedings on April 14, 
1994, the Company transferred certain non-core assets and their related 
liabilities, certain other miscellaneous assets and a $5,000,000 cash 
investment to a liquidating subsidiary, Rosebud Holdings, Inc. and its 
subsidiaries (collectively "Rosebud") for liquidation, and Rosebud issued an 
aggregate $138,118,000 initial principal amount of asset proceeds notes.  As 
of September 30, 1996, most of Rosebud's assets had been liquidated and its 
remaining net assets consist of cash and unimproved real estate, net of 
certain liabilities related to both sold and existing assets.  On June 20, 
1996, the asset proceeds notes were paid in full.  The Company is under no 
obligation to fund additional Rosebud working capital requirements. 

Rosebud's assets, which are net of its remaining liabilities, are included in 
the Company's September 30, 1996 consolidated balance sheet at zero value. 
Cash generated by Rosebud, in excess of its working capital requirements, if 
any, will be paid to Lone Star.

The January 1996 interest payment of $220,000 related to the asset proceeds 
notes was made in cash.  A final principal and interest distribution of 
$4,399,000 and $171,000, respectively, was made in June 1996.  Total 
principal and interest payments of $138,118,000 and $17,129,000, 
respectively, had been made as of September 30, 1996.

In January 1996, Rosebud sold surplus property in Washington State for cash 
proceeds of $1,358,000.  In March 1996, Rosebud sold surplus property in 
Virginia for cash proceeds of $200,000.  In May 1996, Rosebud sold surplus 
property in Texas for cash proceeds of $2,150,000.  In August 1996, Rosebud 
sold surplus property in Washington State for cash proceeds of $3,827,000.





Note 9 - Environmental Matters

The Company is subject to extensive, stringent and complex federal, state 
and local laws, regulations and ordinances pertaining to the quality and 
the protection of the environment and human health and safety, requiring 
the Company to devote substantial time and resources in an effort to 
maintain continued compliance.  Many of the laws and regulations apply to 
the Company's former activities, properties and facilities as well as its 
current operations. Changes to such regulations or the enactment of new 
regulations in the future could require the Company to undertake capital 
improvement projects or to cease or curtail certain current operations or 
could otherwise substantially increase the capital, operating and other 
costs associated with compliance.  Moreover, there can be no assurances 
that judicial or administrative proceedings, seeking penalties or 
injunctive relief, will not be brought against the Company for alleged 
non-compliance with applicable environmental laws and regulations relating 
to matters as to which the Company is currently unaware. In addition, if 
releases of hazardous substances are discovered to have occurred at 
facilities currently or previously owned or operated by the Company, or at 
facilities to which the Company has sent waste materials, the Company may 
be subject to liability for the investigation and remediation of such 
sites.

The federal Water Pollution Control Act, commonly known as the Clean Water 
Act, provides a comprehensive federal regulatory scheme governing the 
discharge of pollutants to waters of the United States.  This regulatory 
scheme requires that permits be secured for discharges of wastewater, 
including stormwater runoff associated with industrial activity, to waters 
of the United States.  The Company has secured or has applied for all 
required permits in connection with its wastewater and stormwater 
discharges.

The Clean Air Act was amended in 1990 to provide for a uniform federal 
regulatory scheme governing control of air pollutant emissions and permit 
requirements.  In addition, certain states in which the Company operates 
have enacted laws and regulations governing the emission of air pollutants 
and requiring permits for sources of air pollutants.  As a result of the 
1990 amendments to the Clean Air Act, the Company is required to apply for 
federal operating permits for each of its cement manufacturing facilities 
at various dates ranging from 1996 through 1999.  As part of the 
permitting process, the Company may be required to install equipment to 
monitor emissions of air pollutants from its facilities.  In addition, the 
Clean Air Act amendments require the United States Environmental 
Protection Agency ("EPA") to develop regulations directed at reducing 
emissions of toxic air pollutants from a variety of industrial sources, 
including the portland cement manufacturing industry.  As part of this 
process, the EPA will identify maximum available control technology 
("MACT") for the reduction of emissions of air toxins from cement 
manufacturing facilities.  On March 20, 1996, the EPA announced proposed 
separate, more stringent MACT standards for those cement manufacturing 
facilities (like Lone Star's Greencastle and Cape Girardeau plants) that 
burn hazardous waste fuels ("HWF"). These standards are subject to public 
comment and are not anticipated by the Company to be effective prior to 
early 1998 and, thereafter, will be implemented over a three-year period. 
They are extremely lengthy and complex, and depending on their terms when 
they become effective, could have the effect of limiting or eliminating 
the use of HWF at one or both facilities.  The Company anticipates that 
standards for facilities burning fossil fuels will be initially proposed 
in the first quarter of 1997.

Cement kiln dust ("CKD"), a by-product of cement manufacturing, is 
currently exempted from regulation as a hazardous waste pursuant to the 
Bevill Amendment to the Resource Conservation and Recovery Act ("RCRA"). 
However, on January 31, 1995 the EPA issued a regulatory determination 
regarding the need for regulatory controls on the management, handling and 
disposal of CKD.  Generally, the EPA regulatory determination provides 
that the EPA intends to draft and promulgate regulations imposing controls 
on the management, handling and disposal of CKD that will be based largely 
on selected components of the existing RCRA hazardous waste regulatory 
program, tailored to address the specific regulatory concerns posed by 
CKD. The EPA regulatory determination further provides that new CKD 
regulations will be designed both to be protective of the environment and 
to minimize the burden on cement manufacturers.  While it is not possible 
to predict at this time what, if any, new regulatory controls on the 
management, handling and disposal of CKD or what increased costs (or range 
of costs), if any, would be incurred by the Company to comply with these 
requirements, the EPA has recently announced that the regulations will be 
promulgated through a rulemaking scheduled to be completed in mid-1997, 
and that, thereafter, these rules would be implemented over a four-year 
period.  The types of controls being considered by the EPA include 
fugitive dust emission controls, restrictions for landfills located in 
sensitive areas, groundwater monitoring, standards for liners and caps, 
metals limits and corrective action for currently active units.

On July 20, 1995, the State of Indiana made a determination that the CKD 
stored at the Company's Greencastle plant is a type I waste and requested 
that the Company apply for a formal permit for an on-site landfill for the 
CKD. The Company understands that similar notices were sent to other 
cement manufacturers in the State of Indiana.  The Company is protesting 
this determination through legal channels and has received a stay to allow 
it to demonstrate that current management practices pose no threat to the 
environment.  The Company believes that the State's determination 
ultimately will be reversed or the Company will receive the needed permit 
or other adequate relief, such as an agreed order requiring certain 
additional waste management procedures that are less stringent than those 
required for type I wastes.  If the Company is not successful in this 
regard, however, like other Indiana cement producers, the Greencastle 
plant could incur substantially increased operating and capital costs.

The Cape Girardeau, Missouri and Greencastle, Indiana plants, which are 
the Company's two cement manufacturing facilities using hazardous waste 
fuels ("HWF") as a cost saving energy source, are subject to strict 
federal, state and local requirements governing hazardous waste treatment, 
storage and disposal facilities, including those contained in the Boiler 
and Industrial Furnace Regulations promulgated under RCRA (the "BIF 
Rules"). These facilities qualified for and operate under interim status 
pursuant to RCRA and the BIF Rules.  While Lone Star believes that it is 
currently in compliance with the extensive and complex technical 
requirements of the BIF Rules, in the past Lone Star has been involved in 
certain environmental enforcement proceedings seeking civil penalties and 
injunctive relief for past non-compliance, and there can be no assurances 
that the Company will be able to maintain compliance with the BIF Rules or 
that changes to such rules or their interpretation by the relevant 
agencies or courts might not make it more difficult or cost-prohibitive to 
continue to burn HWF.

The Company is currently engaged in the process of securing the permit 
required under RCRA and the BIF Rules for the Cape Girardeau plant.  The 
Company anticipates that the Greencastle plant also will go through this 
permitting process in 1997.  These permits are a requirement to enable 
Lone Star to continue the use of HWF at those facilities.  The permitting 
process is lengthy and complex, involving the submission of extensive 
technical data.  There can be no assurances that the Company will be 
successful in securing a final RCRA permit for either or both of its HWF 
facilities.  In addition, if received, the permits could contain terms and 
conditions with which the Company cannot comply or could require the 
Company to install and operate costly control technology equipment.

Past operations of the Company, certain of its subsidiaries, or its 
predecessors have resulted in releases of hazardous substances at sites 
currently or formerly owned by the Company and certain of its subsidiaries 
or where waste materials generated by the Company have been disposed.  CKD 
and other materials were placed in depleted quarries and other locations 
for many years.  The Company has been named by the EPA as a potentially 
responsible party for the investigation and remediation of several 
Superfund sites. Available factual information indicates that the 
Company's disposal of waste at these sites (other than sites that are 
remediated or as to which the Company has entered into settlement 
agreements with the EPA) was small or non-existent, and the Company may 
have certain defenses arising out of its reorganization.  In certain 
instances the Company has availed itself of settlement offers it has found 
attractive.  The Company has received a letter from EPA Region 4 
reasserting a claim for approximately $830,000 of oversight costs and 
accrued interest associated with the Company's cleanup of the site of a 
former woodtreating operation in Dania, Florida.  The Company plans to 
contest this claim. The Company is also reviewing certain of its inactive 
properties to determine if any remedial action may be required at these 
sites.


Note 10 - Litigation

From time to time the Company is named as a defendant in lawsuits 
asserting product liability for which the Company maintains insurance 
coverage.  In this regard, the Company is one of many defendants, 
including several cement manufacturers, named in two products liability 
lawsuits in southern Texas that allege that cement is an unreasonably 
dangerous product that has injured a large number of plaintiffs.  The 
Company believes this type of litigation is totally without merit and 
plans to contest the lawsuits vigorously.  In late 1995 an office building 
in Boston, Massachusetts, constructed in 1983 using concrete pilings 
produced by San-Vel Concrete Corporation ("San-Vel"), an inactive Lone 
Star subsidiary, was demolished by order of the City of Boston based upon 
an engineering report that the pilings were unreliable. The owner of the 
demolished building has notified the Company, among others, that it 
intends to hold responsible parties liable. At the request of the City of 
Boston, San-Vel has provided a list of the approximately twenty-five other 
buildings built in that City between 1980 and 1990 using San-Vel pilings. 
The City has reportedly inspected these buildings visually, without noting 
any apparent piling failure, although engineering studies are being 
conducted with final results expected soon. The Company believes that the 
cement component of the concrete used to produce the pilings in certain of 
these buildings, including the demolished building, was produced by it at 
one of its formerly owned cement plants.  There has been no indication 
that the cement was defective.  The Company believes that it has good 
defenses to any claim of liability that may be asserted against it 
relating to the demolished building.  The Company has also been named in a 
lawsuit asserting that it has successor liability for certain defunct 
subsidiaries which allegedly manufactured faulty prestressed "double 
tees," resulting in property damage to a retail store (and consequent loss 
of business) in south Florida during Hurricane Andrew in 1992.  All of 
these matters are being defended by the Company's insurers.


 



 

 











ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF
		FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Financial Condition

The Company believes that cash and marketable securities on hand of 
$58.3 million and funds generated by operations will be adequate to 
cover current working capital and capital expenditure needs.

Cash generated by operating activities of $46.6 million for the first 
nine months of 1996 primarily reflects income from operations and 
changes in working capital.

During the first nine months of 1996, the Company used $29.7 million 
for investing activities primarily representing capital expenditures.

Net cash outflows from financing activities of $8.7 million reflects 
the purchase of treasury stock and the payment of cash dividends, 
partly offset by proceeds from the exercise of stock options.

Working capital on September 30, 1996 was $118.3 million, compared to 
$81.7 million at December 31, 1995. Current assets increased $29.7 
million principally due to higher accounts receivable and a higher 
marketable securities balance reflecting the seasonal nature of the 
Company's business, partly offset by lower inventory and lower prepaid 
expenses.  Also contributing to the increase in working capital was 
the June 1996 reduction of a valuation allowance resulting in a $50.0 
million deferred tax asset of which $10.0 million is classified as 
current.  During the third quarter of 1996 the deferred tax asset 
decreased by $12.9 million reflecting the current period utilization. 
Current liabilities decreased $7.0 million primarily due to pension 
contributions and interest payments made during the nine-month period.
  
Investments in joint ventures decreased $0.4 million reflecting cash 
dividends received of $6.0 million partly offset by equity income from 
Kosmos Cement Company.  Net property, plant and equipment increased 
$9.8 million reflecting capital expenditures partly offset by 
depreciation. The non-current pension liability decreased by $6.8 
million, primarily reflecting payments made during the nine-month 
period ended September 30, 1996 in excess of expenses.

In June 1996, Rosebud Holdings, Inc. declared a principal redemption 
of the remaining $4.4 million of asset proceeds notes.  With this 
payment the asset proceeds notes were paid in full one year ahead of 
their maturity date.

In August 1996, the Company's Board of Directors declared a $0.05 per 
share dividend paid on September 16, 1996 to shareholders of record as 
of September 1, 1996.  Previously in 1996, two additional dividends of 
$0.05 per share were paid to shareholders.

As part of its stock purchase program, during the first nine months of 
1996 the Company repurchased in open market transactions an additional 
263,600 shares of treasury stock at a total cost of $8.2 million.  In 
October 1996 the Company purchased 708,800 shares of its common stock 
for $25.5 million.

The Company contributed an additional $10.4 million to the hourly and 
salaried pension plans in the third quarter of 1996.  The pension 
plans are now considered to be fully funded and as a result the 
Pension Benefit Guaranty Corporation agreed to release its liens on 
the Oglesby, Illinois cement plant and the Company's interest in the 
Kosmos Cement Company.

Upon emergence from bankruptcy, the Company had various deferred tax 
assets arising from operating loss carryforwards, various credit 
carryforwards and reserves not yet deductible for tax purposes, but 
provided a full valuation allowance against these assets.  Based on 
the current expectation that the Company is more likely than not to 
generate enough future taxable income to utilize a portion of these 
deferred tax assets, the Company reduced this valuation allowance by 
$50.0 million in the second quarter of 1996. The benefit from this 
reduction is shown as an addition to paid-in capital in accordance 
with the provisions of AICPA Statement of Position 90-7, "Financial 
Reporting by Entities in Reorganization Under the Bankruptcy Code". 
During the third quarter of 1996 the deferred tax asset decreased by 
$12.9 million reflecting the current period utilization.

The Company is subject to extensive, stringent and complex federal, 
state and local laws, regulations and ordinances pertaining to the 
quality and the protection of the environment and human health and 
safety, requiring the Company to devote substantial time and resources 
in an effort to maintain continued compliance.  Many of the laws and 
regulations apply to the Company's former activities, properties and 
facilities as well as its current operations.  Changes to such 
regulations or the enactment of new regulations in the future could 
require the Company to undertake capital improvement projects or to 
cease or curtail certain current operations or could otherwise 
substantially increase the capital, operating and other costs 
associated with compliance.  Morever, there can be no assurances that 
judicial or administrative proceedings, seeking penalties or 
injunctive relief, will not be brought against the Company for alleged 
non-compliance with applicable environmental laws and regulations 
relating to matters as to which the Company is currently unaware.  In 
addition, if releases of hazardous substances are discovered to have 
occurred at facilities currently or previously owned or operated by 
the Company, or at facilities to which the Company has sent waste 
materials, the Company may be subject to liability for the 
investigation and remediation of such sites.  

The Company believes that it has adequately provided for costs related 
to its ongoing obligations with respect to the known environmental 
liabilities resolved in connection with the bankruptcy proceedings and 
other known unresolved environmental liabilities.  Expenditures for 
environmental liabilities during the nine months ended September 30, 
1996 did not have a material effect on the financial condition of the 
Company.


Results of Operations

Net Sales

Consolidated net sales of $118.3 million for the third quarter of 1996 
and $273.6 million for the first nine months were $17.7 million and 
$32.8 million, respectively, above the comparable prior-year periods. 
The increase in net sales reflects the impact of cement price 
increases implemented in April 1996 and during the last nine months of 
1995 combined with higher cement shipments.  Also contributing to the 
favorable sales were higher ready-mixed concrete average selling 
prices and shipments partly offset by lower shipments of construction 
aggregates.

Cement operations recorded sales for the third quarter and first nine 
months of 1996 of $87.7 million and $206.1 million, respectively. 
Cement sales for the current three and nine-month periods were $16.2 
million and $31.7 million, respectively, higher than the comparable 
prior-year periods.  Cement shipments for the third quarter and for 
first nine months of 1996 were 17% and 12%, respectively, above the 
comparable prior-year periods due to strong demand for cement, better 
weather conditions in the second and third quarters of 1996 compared 
to 1995 and higher sales of slag cement.  Cement average net realized 
selling prices for the three and nine-month periods ended September 
30, 1996 were 5% and 6%, respectively, above the comparable prior-year 
periods.

Sales of construction aggregates for the third quarter and first nine 
months of 1996 were $16.6 million and $33.3 million, respectively. 
Construction aggregates sales for the current three and nine-month 
periods were $0.7 million and $5.3 million below the comparable prior-
year periods.  This decrease is primarily due to the sale of the Nova 
Scotia, Canada quarry in the fourth quarter of 1995.  New York Trap 
Rock recorded an increase in sales of $2.2 million and $2.9 million, 
respectively, for the current three and nine-month periods primarily 
due to higher shipments and higher average selling prices.

Ready-mixed concrete and other operations recorded sales of $14.0 
million and $34.3 million for the current three and nine-month 
periods, which were $2.2 million and $6.3 million, respectively, above 
the comparable prior-year periods.  The improvement is primarily due 
to increased shipments and higher average selling prices at all 
locations, with particularly strong demand at the Memphis, Tennessee 
operations.

The Company's operations are seasonal and, consequently, the interim 
results are not indicative of the results to be expected for the full 
year.

Gross profit from the cement operations was $35.9 million and $66.6 
million for the three and nine months ended September 30, 1996 as 
compared to a gross profit of $25.2 million and $51.6 million, 
respectively, for the comparable prior-year periods.  These results 
primarily reflect the increases in shipments and the increases in 
average net realized selling prices for both periods.

Construction aggregates recorded gross profit of $3.7 million and $3.9 
million for the current three and nine-month periods as compared to a 
gross profit of $3.8 million for the 1995 third quarter and $3.0 
million for the first nine months of 1995. This improvement reflects 
favorable results from New York Trap Rock operations and the 
elimination in 1996 of lease costs associated with the Company's 
purchase of the fleet of barges used by New York Trap Rock in late 
June 1995, partly offset by the effects of the sale of the Nova Scotia 
quarry in the fourth quarter of 1995.

Gross profit from the ready-mixed concrete and other construction 
products of $3.4 million and $6.8 million, respectively, for the three 
and nine months ended September 30, 1996 was $1.0 million and $2.8 
million, respectively, higher than the comparable prior-year periods, 
primarily due to higher shipments and higher average net realized 
selling prices at all locations, with particularly strong results from 
the Memphis, Tennessee.

Included in the calculation of gross profit are sales less cost of 
sales including depreciation related to cost of sales (which excludes 
depreciation of office equipment, furniture and fixtures which are not 
related to the cost of sales).

Pre-tax income from joint ventures of $3.0 million and $5.4 million, 
respectively, for the three and nine-month periods of 1996 were $0.2 
million and $0.5 million, respectively, higher than the comparable 
prior-year periods.  This represents the Company's share of earnings 
from the Kosmos Cement Company.  The increase resulted primarily from 
higher average net realized selling prices.

Other income of $0.7 million for the three months ended September 30, 
1996 was $0.7 million lower than the comparable prior-year period 
primarily due to lower insurance proceeds resulting from prior-year 
claims received in the third quarter of 1995.  Other income for the 
1996 nine-month period was $0.3 million lower than the comparable 
prior-year period due to lower rental income, and the insurance 
proceeds received in the third quarter of 1995 which did not recur in 
1996, partly offset by the receipt in first quarter 1996 of a sales 
and use tax refund, including interest, related to a prior-year.

Selling, general and administrative expenses for the 1996 three-month 
period approximated those of the prior-year.  For the nine months 
ended September 30, 1996, selling, general and administrative expenses 
decreased $0.9 million primarily due to lower pension and other 
postretirement benefit expenses related to retired employees.

Interest expense decreased $0.6 million and $1.7 million for the three 
and nine-months ended September 30, 1996 from the comparable prior-
year periods. The decrease reflects the payment of the production 
payment liability in December 1995.

The income tax expense of $12.9 million and $19.8 million, for the 
third quarter and first nine months of 1996 increased $4.3 million and 
$7.4 million, respectively, from the comparable 1995 periods, 
reflecting higher pre-tax income and a higher effective tax rate.

Net income of $25.3 million, or $1.86 per share, for the third quarter 
of 1996 was $7.2 million, or $0.56 per share better than the 
comparable prior-year period.  This represents a 43% improvement in 
earnings per share over the 1995 third quarter.  The improvement was 
primarily due to the realization of cement price increases over the 
last nine months of 1995 and in April 1996, and higher cement 
shipments.  The third quarter improvement was also due to favorable 
results from the ready-mixed concrete operations on higher average 
selling prices and increased shipments and improved earnings from the 
construction aggregates operations, the Kosmos Cement Company joint 
venture and decreased interest expense.  The favorable third quarter 
1996 results were partly offset by higher cost of sales associated 
with increased shipments and higher income taxes primarily due to 
higher pre-tax earnings.

Net income of $39.3 million, or $2.91 per share for the first nine 
months of 1996 was $14.2 million, or $1.03 per share favorable to the 
comparable prior-year period.  The increase was due primarily to the 
impact of cement price increases in April 1996 and the last nine 
months of 1995, combined with higher cement shipments, the result of 
better weather conditions in the second and third quarters of 1996 as 
compared to 1995 and higher sales of slag cement.  Also contributing 
to the increase were favorable results from the ready-mixed concrete 
operations attributable to higher average selling prices and higher 
shipments.  Improved results were also recognized from the 
construction aggregates operations, the Kosmos Cement Company joint 
venture, decreased selling, general and administrative expenses and 
lower interest expense. The improvement in net income was partly 
offset by increased cost of sales associated with increased shipments 
and higher income tax expense in 1996 primarily reflecting higher pre-
tax earnings.





 



 

 












PART II.  OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS

	See Note 10 of Notes to Financial Statements.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

	(a)	Index of Exhibits:

		4.3(iv).  Fourth Amendment, dated as of October 3, 1996, 
to the Financing Agreement, dated as of April 13, 1994 
among Lone Star Industries, Inc., its subsidiary New York 
Trap Rock Corporation and The CIT Group/Business Credit, 
Inc.

		11.	Statement Re Computation of Per Share Earnings.

		12.	Statement Re Computation of Ratio of Earnings to 
			Fixed Charges.

		27.	Financial Data Schedule.






                            SIGNATURES



	Pursuant to the requirements of the Securities Exchange Act of 
1934, Lone Star Industries, Inc. has duly caused this report to be 
signed on its behalf by the undersigned thereunto duly authorized.

							LONE STAR INDUSTRIES, INC.



Date: November 7, 1996			By:  WILLIAM E. ROBERTS	
							     William E. Roberts
							    Vice President, Chief
							      Financial Officer,
							   Controller and Treasurer



Date: November 7, 1996			By:    JAMES W. LANGHAM	 
							       James W. Langham
							        Vice President