consolidated statements of income	Medusa Corporation and 
Subsidiaries

Year Ended December 31                       1996           1995          1994
												    (In Thousands, except per share data)

Net Sales									                          $323,377		$293,327		$276,293

Costs and Expenses:
  Cost of sales							                       200,999		 184,997		 189,028
  Selling, general and administrative	        26,546		  23,492		  21,328
  Depreciation and amortization			            14,253		  15,448		  13,830
											                                  241,798		 223,937		 224,186
Operating Profit							                       81,579		  69,390		  52,107

Other Income (Expense):
  Interest income							                       1,155		   2,225		   1,262
  Interest expense						                      (3,674)		 (7,575)   (7,526)
  Miscellaneous-net						                        145 		   (193)       (6)
											                                   (2,374)	  (5,543)   (6,270)

Income Before Taxes and Extraordinary
    Item		                           							  79,205		  63,847		  45,837

Provision for Income Taxes				                24,945		  20,635		  15,957

Income Before Extraordinary Item			           54,260		  43,212		  29,880

Extraordinary Item, less applicable
  income tax reduction (Note E)	          		  (1,770)		      -         -

Net Income								                         	$ 52,490		$ 43,212		$ 29,880
______________________________________________________________________________

Net Income Per Common Share:
  Primary:
     Income before extraordinary item	      $   3.35		$   2.68		$   1.81
     Extraordinary item					                    (.11)		      -		       -
											                                 $   3.24		$   2.68		$   1.81

  Fully Diluted:
     Income before extraordinary item       $   3.17  $   2.55  $   1.76
     Extraordinary item					                    (.10)	       -         -
											                                 $   3.07		$   2.55		$   1.76

Primary Average Common Shares
  Outstanding				                       				  16,181		  16,139		  16,540
______________________________________________________________________________
See Notes to Consolidated Financial Statements


consolidated balance sheets	Medusa Corporation and Subsidiaries

December 31                                             1996              1995
														(In Thousands, except share data)
ASSETS

  Current Assets:
    Cash and short-term investments					                   $ 25,045			$ 33,166
    Accounts receivable, less allowances
     of $1,173 ($609 in 1995)						                          28,708     21,410
    Inventories										                                    31,177			  29,266
    Other current assets								                              4,490			   4,395
          Total Current Assets						                         89,420			  88,237
  Property, Plant and Equipment						                       125,729			 118,864
  Intangible and Other Assets						                           8,297			  12,477
          Total Assets								                             $223,446			$219,578
______________________________________________________________________________
LIABILITIES AND SHAREHOLDERS' EQUITY

  Current Liabilities:
    Current maturities of long-term debt			                $     41			$     41
    Accounts payable									                                15,575     14,952
    Accrued compensation and payroll taxes			                 7,014			   5,608
    Other accrued liabilities					                        	   9,247			   8,589
    Income taxes payable								                              2,728			   2,500
         Total Current Liabilities					                      34,605			  31,690
  Long-Term Debt										                                    4,084			  61,624
  Accrued Postretirement Health Benefit Cost		               27,760			  27,446
  Reserves and Other Liabilities			                     			   2,745			   2,611
  Accrued Pension Liability							                              282			     659
  Shareholders' Equity:
    Preferred shares, without par value-3,000,000 
      shares authorized:
       1,000,000 shares each of Class A Serial Preferred;
       Class B Serial Preferred; and Class C Preferred
         Shares								                                  		       -			       -
    Common shares, without par value:
      Authorized-50,000,000 shares
      Outstanding-16,924,006 shares
        (16,329,901 in 1995)						                        	       1			       1
    Paid in capital									                                 57,159			  23,433
    Retained earnings									                              140,124			  97,515
    Unvested restricted common shares				                       (39)		     (40)
    Unearned restricted common shares				                    (7,516)		  (5,672)
    Currency translation adjustment					                       (930)			   (890)
         Total Paid in Capital and Retained
           Earnings									                                188,799			 114,347
    Less Cost of Treasury Shares-1,367,440 shares
       (836,267 shares in 1995)				                     		  (34,829)			(18,799)
         Total Shareholders' Equity					                    153,970			  95,548
         Total Liabilities and Shareholders'
            Equity									                                $223,446			$219,578
______________________________________________________________________________
See Notes to Consolidated Financial Statements

consolidated statements of cash flows		Medusa Corporation and Subsidiaries

Year Ended December 31                               1996      1995       1994
 	(In Thousands)

Cash Flows From Operating Activities:
	
  Net income	                                      $ 52,490	$ 43,212	$ 29,880
  Adjustments to reconcile net income to net
    cash provided from operating activities:
       Depreciation and amortization	                14,253	  15,448	  13,830
       Provision (benefit) for deferred income
         taxes	                                          10	    (944)   1,660
       Postretirement health benefit cost	              232      222      491
       (Gain) loss on sale of capital assets           (181)	    (33)      12
       Accounts receivable	                           7,298     2,626	   (716)
       Inventories and other current assets         	(1,800)  	(7,793) 	1,774
       Accounts payable and other current
         liabilities	                                 2,998	      220  	5,430
       Other assets	                                  1,840	     (231) 	1,986
       Accrued pension, reserves and other
             liabilities	                             1,368      (46)  (2,475)
           Net Cash Provided From Operating
             Activities	                             63,912	  52,681	  51,872
Cash Flows From Investing Activities:
  Capital expenditures	                             (19,806)	(25,345) (14,694)
  Proceeds from sale of capital asset	                  239	     359	   1,622
           Net Cash Used By Investing Activities:   (19,567)	(24,986)	(13,072)
Cash Flows From Financing Activities:
  Purchase of treasury shares                      	(13,599)	 (1,878)	(14,608)
  Dividends paid	                                    (9,881) 	(8,152) 	(8,264)
  Stock options exercised	                            1,882	   1,649	   1,278
  Proceeds from issuance of long-term debt	               -	     365	       -
  Payments on long-term debt	                       (30,868)	(35,000)	      -
  Issuance of restricted shares	                          -	       -	      63
           Net Cash Provided From (Used By)
             Financing Activities	                 (52,466)	 (43,016) (21,531)
  Increase (Decrease)In Cash And Short-Term 
     Investments	                                   (8,121) 	(15,321) 	17,269
Cash And Short-Term Investments At
   Beginning Of Year	                               33,166	   48,487	  31,218
Cash And Short-Term Investments At End Of Year	   $ 25,045	 $ 33,166	$ 48,487
______________________________________________________________________________

Supplemental Disclosure of Cash Flow Information:
  Cash paid during the year for:
    Interest (net of $26 capitalized
       in 1995)	                                  $  4,064	 $  7,566	$  7,509
    Income taxes	                                   24,707	   20,896	  14,367
______________________________________________________________________________
See Notes to Consolidated Financial Statements


consolidated statements of shareholders' equity
  Medusa Corporation and Subsidiaries



				                                                                  Unvested
				                                                                Restricted
	                                   Common	  Paid in	     Retained	   Common
	                                   Shares	  Capital	     Earnings	   Shares
____________________________________________________________________

   (In Thousands, except share data)
Balance At January 1, 1994        $     1     $16,377      $40,839   $    (26)
Net income                                                 29,880
  Dividends paid-$.50 per
     common share                                          (8,264)
  Issuance of 83,070 restricted
     common shares                              2,045                     (79) 
  Forfeiture of 51,000 restricted
     common shares                               (768)
  Exercise of 187,536 stock options             2,070
  Purchase of 652,157 treasury shares
  Amortization for vesting of
      restricted common shares                                             79
Currency translation adjustment
Balance At December 31, 1994           1      19,724       62,455         (26)
Net income                                                 43,212
  Dividends paid-$.50 per
     common share                                          (8,152)
  Issuance of 117,940 restricted
     common shares                              2,851                    (120)
  Exercise of 149,417 stock options             2,000
  Purchase of 82,402 treasury shares
  Retirement of 35,697 treasury shares         (1,142)
  Amortization for vesting of
      restricted common shares                                            106
  Currency translation adjustment
Balance At December 31, 1995           1      23,433         97,515       (40)
Net income                                                   52,490
  Dividends paid-$.60 per
     common share                                            (9,881)
  Issuance of 95,080  restricted
     common shares                             2,741                    (119)
  Exercise of 225,537 stock options            4,313
  Purchase of 441,206 treasury shares
  Conversion of subordinated notes 
      to 805,161 common shares                26,672
  Amortization for vesting of
      restricted common shares                                           120
  Currency translation adjustment
Balance At December 31, 1996      $     1    $57,159       $140,124 $    (39)
_______________________________________________________________________
See Notes to Consolidated Financial Statements.


consolidated statements of shareholders' equity
  Medusa Corporation and Subsidiaries


	Unearned
	Restricted	Currency		Total
	Common	Translation	Treasury
	Shareholders'
	Shares	Adjustment	Shares	Equity
________________________________________________________________________
__
     (In Thousands, except share data)
Balance At January 1, 1994     $(2,759)	     $  (786)   $(2,169)     $51,477
Net income                                                            29,880
  Dividends paid-$.50 per
     common share                      (8,264)
  Issuance of 83,070 restricted
     common shares              (1,903)                                  63
  Forfeiture of 51,000 restricted
     common shares                768
  Exercise of 187,536 stock options                                   2,070
  Purchase of 652,157 treasury shares                  (15,400)     (15,400)
  Amortization for vesting of
      restricted common shares    383                                   462
Currency translation adjustment               (315)        	            (315)
Balance At December 31, 1994    (3,511)     (1,101)    (17,569)      59,973
Net income                                                           43,212
  Dividends paid-$.50 per
     common share                                                    (8,152)
  Issuance of 117,940 restricted
     common shares              (2,731)
  Exercise of 149,417 stock options                       (494)      1,506
  Purchase of 82,402 treasury shares                    (1,878)     (1,878)
  Retirement of 35,697 treasury shares                   1,142
  Amortization for vesting of
      restricted common shares    570                                  676
  Currency translation adjustment            211	                       211
Balance At December 31, 1995   (5,672)       (890)   (18,799)       95,548
Net income                                                          52,490
  Dividends paid-$.60 per
     common share                                                   (9,881)
  Issuance of 95,080  restricted
     common shares                (2,622)
  Exercise of 225,537 stock options                   (2,431)        1,882
  Purchase of 441,206 treasury shares                (13,599)      (13,599)
  Conversion of subordinated notes 
      to 805,161 common shares                                      26,672
  Amortization for vesting of
      restricted common shares  778                                    898
  Currency translation adjustment              (40)	                    (40)
Balance At December 31, 1996 $(7,516)       $  (930)  $(34,829)   $153,970
________________________________________________________________________
See Notes to Consolidated Financial Statements.


notes to consolidated financial statements
Medusa Corporation and Subsidiaries

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
The consolidated financial statements include the company and its 
wholly-owned subsidiaries.  All significant intercompany items have been 
eliminated.

The company processes mineral deposits, principally limestone, by 
converting these material resources through physical and chemical 
methods to intermediate products (cement and aggregates) sold to the 
construction industry principally in the eastern half of the United 
States.  Sales of such products constitute more than 90% of consolidated 
net sales and net income.

Cash and Short-Term Investments
For purposes of the statement of cash flows, the company considers cash 
equivalents to be all highly liquid securities with an original maturity 
of three months or less.  Estimated fair value approximates the carrying 
amount.

Inventories
Inventories are valued principally at the lower of cost or market 
determined using the last-in, first-out (LIFO) cost method.  The average 
cost method is used for substantially all supplies.

Property, Plant and Equipment
Depreciation of property, plant and equipment for financial reporting 
purposes is provided over the estimated useful lives of the assets 
principally by the straight-line method.

Net Income Per Share
Primary net income per share is computed by dividing net income by the 
weighted average number of common shares and common share equivalents 
(options) outstanding during the period.  Fully diluted net income per 
share is computed based on the weighted average number of common shares 
and common share equivalents outstanding during the period, as if the 
convertible subordinated notes were converted into common shares at the 
beginning of the period after giving retroactive effect to the 
elimination of interest expense, net of income tax effect, applicable to 
the subordinated notes.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities 
and disclosure of contingent assets and liabilities at the date of the 
financial statements and the reported amounts of revenues and expenses 
during the reporting period.  Actual results could differ from those 
estimates.

The company estimates its quarry's end-of-life-cycle closing costs and 
amortizes them based on actual annual stone production over the quarries 
total estimated stone reserves.

NOTE B-INVENTORIES
At December 31 (in thousands):

	1996	1995
Finished goods                $13,594    $12,980
Work in process                 3,424      2,993
Raw materials                   1,124      2,015
Supplies                       13,035	     11,278
                              $31,177    $29,266
________________________________________________

Use of the first-in, first-out (FIFO) cost method would have increased 
inventories from the amounts reported at December 31 by $7,590,000 in 
1996 and $7,238,000 in 1995.

NOTE C-PROPERTY, PLANT AND EQUIPMENT-AT COST

At December 31 (in thousands):

	1996	1995
Land                        $ 10,989   $ 10,831
Buildings and improvements    22,169     20,465
Machinery and equipment      343,028    327,523
                             376,186    358,819
Less accumulated
  depreciation               (250,457)  (239,955)
                             $125,729   $118,864
________________________________________________

NOTE D-LEASES
The company leases various cement storage facilities, vehicles and 
various other equipment under capital and operating leases with terms 
from one to forty years.

Future minimum payments, by year, and in the aggregate, under 
capitalized leases and operating leases with initial or remaining terms 
of one year or more are as follows at December 31, 1996 (in thousands):

	Capital	Operating
	Leases	Leases
1997                     $   181          $ 1,329
1998                         181            1,097
1999                         181              537
2000                         181              123
2001                         181               92
Thereafter                 4,686            1,728
Total minimum
  lease payments           5,591          $ 4,906

Less interest             (1,791)

Present value of
  future minimum
  lease payments         $ 3,800
_________________________________________________

The costs of assets capitalized under leases at December 31 are as 
follows (in thousands):

	1996	1995
Machinery and equipment       $ 4,035    $ 4,035

Less accumulated
  depreciation                 (1,880)    (1,693)
                              $ 2,155    $ 2,342
________________________________________________

The weighted average interest rate for capital leases was 3.7% in 1996.
The capital lease agreements contain certain covenants which, among 
other things, require the company to meet certain consolidated financial 
tests, including tests relating to minimum net worth, financial 
leverage, fixed obligation coverage and cash flow coverage.  At December 
31, 1996, the minimum required level of net worth under these covenants 
was $25.0 million.

Rental expense was $1,942,000, $1,828,000, and $2,069,000 for 1996, 1995 
and 1994, respectively.


NOTE E-SHORT AND LONG-TERM FINANCING
The company has an unsecured $65.0 million Revolving Credit Agreement 
("Revolver") with four banks that expires December 31, 2001.  The 
Revolver allows borrowings bearing interest at .35% to .75% per annum 
above the reserve-adjusted rate at which Eurodollar deposits are offered 
by prime banks in the Eurodollar interbank market ("LIBOR").  The 
Revolver bears a commitment fee of .2% to .35% per annum on the unused 
portion.  The interest rate and commitment fee vary based on the 
company's ratio of consolidated liabilities to net worth.  The company 
also has unsecured bank lines of credit totalling $20.0 million.  At 
December 31, 1996, no amounts were outstanding under any of these credit 
facilities.

Long-term debt consists of the following at December 31 (in thousands):

                                 	1996	     1995
6% convertible subordinated
  notes, due 2003, interest
  payable semi-annually	      $     -     $57,500
Capitalized leases              3,800       3,800
Other                             325         365
                                4,125      61,665
Less current portion              (41)        (41)
                              $ 4,084     $61,624
________________________________________________

The 6% convertible subordinated notes ("Notes") were redeemed effective 
December 2,1996.  Note holders representing $26.7 million in Notes 
converted into 805,161 common shares, with the balance of the holdings 
receiving cash of $30.8 million.  This redemption, including the write-
off of unamortized debt issuance costs, was $1,770,000 net of income tax 
benefit of $787,000 and is reflected as an extraordinary item.

The Revolver contains certain convenants which, among other things, 
require maintenance of certain levels of net worth and certain specified 
ratios of current assets to liabilities, interest coverage and 
liabilities to net worth.  At December 31, 1996 the company was in 
compliance with all covenants.

The average interest rate incurred on all borrowings was 6.7% in 1996, 
7.5% in 1995, and 7.3% in 1994.

The company has available bank stand-by letter of credit facilities of 
$10.0 million of which $6.0 million was being utilized at December 31, 
1996.  These facilities bear a commitment fee of .5% per annum on the 
used portion.  These instruments, the fair value of which approximates 
market, are considered off-balance-sheet risk and represent conditional 
commitments issued to guarantee the company's performance to various 
third parties.

The fair value of the convertible subordinated notes was $56.2 million 
in 1995 and was estimated based on the current rates offered to the 
company for debt of the same remaining maturities.

NOTE F-POSTRETIREMENT HEALTH BENEFITS
The company provides substantially all employees with health care and 
life insurance benefits through unfunded defined benefit plans upon 
retirement.



The net periodic postretirement benefit cost was as follows (in 
thousands):

	                            1996	   1995	   1994
Service cost               $  539  $  422  $  470
Interest cost on 
  accumulated
  postretirement benefit
  obligation               1,495   1,583   1,511
Net amortization            (521)   (702)   (523)

Net periodic postretire-
  ment benefit cost       $1,513  $1,303  $1,458
_________________________________________________

The following table sets forth the plans' funded status reconciled with 
the amounts shown in the company's balance sheets at December 31 (in 
thousands):

                                	1996	    1995
Accumulated Postretirement
  Benefit Obligation:
      Retirees                 $10,670   $10,474
      Eligible active plan
        participants             4,229     4,826
      Other active plan
        participants             6,795     7,596
                                21,694    22,896
Unrecognized net gain            7,176     5,742
                                28,870    28,638

Less current amount in other
  accrued liabilities           (1,110)   (1,192)
Accrued Postretirement Health
  Benefit Cost                 $27,760   $27,446
________________________________________________

In 1996, the cost of benefits was assumed to increase by  9.50% 
initially and then decrease gradually to 5% by 2002 and remain at that 
level thereafter.  In prior years, the cost of benefits was assumed to 
increase 10.25% annually through 1996 and then decrease gradually to 5% 
by 2002, and remain at that level thereafter.  An increase in the 
assumed health care cost trend rate by one percentage point would 
increase the accumulated postretirement benefit obligation as of 
December 31, 1996 by approximately $2.6 million and the net periodic 
postretirement benefit cost by $0.3 million for the year.  The discount 
rate in determining the accumulated postretirement benefit obligation 
was 7.25% in 1996 (7.25% in 1995 and 8.5% in 1994).

NOTE G-INCOME TAXES
A reconciliation between the statutory federal income tax rate and the 
company's effective income tax rate is as follows:

                            	1996	   1995   	1994 
Statutory rate               35.0%   35.0%   35.0%
State income tax, net of
  federal income tax
  benefits                    2.6     3.7      4.2
Percentage depletion         (5.8)   (5.6)    (4.7)
Tax exempt interest           (.1)	   (.2)       -
Other                         (.2)    (.6)      .3
Effective rate               31.5%   32.3%    34.8%
_________________________________________________

Components of the provision for income taxes were as follows (in 
thousands):

                            	1996	       1995	      1994
Deferred income tax 
  expense (benefit)      $     10     $  (944)   $ 1,660
Current income tax
  expense                  24,935      21,579     14,297

                          $24,945     $20,635    $15,957
________________________________________________________

The income tax provisions include state income tax provisions of 
$3,260,000, $3,720,000 and $2,988,000 for 1996, 1995 and 1994, 
respectively.

Components of the net deferred tax assets shown in the company's 
balance sheets at December 31 were as follows (in thousands):

                                	1996	      1995
Net book value of fixed assets
  in excess of tax basis     $(11,484)  $(10,727)
Financial reporting accrual
  for postretirement health
  benefits                     11,707     11,713
Other financial reporting
  accruals                      4,010      3,805
Other taxable temporary
  differences                    (636)     (611)
Other deductible temporary
  differences                   1,608     1,035
                             $  5,205  $  5,215
________________________________________________

Net deferred income tax assets associated with certain current items 
included in other current assets were 
$2,815,000, and $2,609,000 at December 31, 1996 and 1995, respectively.

Net deferred income tax assets associated with certain non-current items 
are included in intangible and other assets.

NOTE H-PENSIONS AND EMPLOYEE BENEFIT PLANS
The company has defined benefit pension plans which cover substantially 
all of its employees.  The plans generally provide benefit payments 
using a formula based on length of service and final average 
compensation, except for most hourly employees for whom the benefits are 
a fixed amount per year of service.  The company's policy is to fund at 
least the minimum required by applicable regulations.

Net periodic pension cost was as follows (in thousands):

                               	1996	      1995	     1994
Service cost-benefits
  earned during the year    $  1,193   $    929  $  1,013
Interest cost on projected
  benefit obligation          2,287       2,059     1,859
Actual return on plan 
  assets                     (4,792)     (4,983)      966
Curtailment effect of early
  retirement incentive          339           -         -
Net amortization and
  deferral                    2,699       3,225    (2,750)
Net periodic pension cost $   1,726    $  1,230  $  1,088
________________________________________________________

The following table sets forth, by funded status, the amounts recognized 
in the company's balance sheets at December 31 for its pension plans (in 
thousands):


       
                               1996         1995     
                           	Over-	Under-	Over-	Under-
	                        funded*	funded*	funded*	funded*
Actuarial present value
  of benefit obligations:
  Vested                $10,239  $14,987   $9,139  $17,338
  Nonvested                 686    4,048      269      148
Accumulated benefit
  obligation             10,925   19,035    9,408   17,486
Effect of future pay
  increases               3,440        -    3,000        -
Projected benefit
  obligation             14,365   19,035   12,408   17,486
Plan assets at fair
  value                  13,862   18,754   11,975   16,827
Projected benefit
  obligation less than
  (in excess of) plan
  assets                   (503)    (281)    (433)   (659)
Unrecognized net (gain)
  loss on assets            531   (1,146)     235   1,193
Unrecognized net (asset)
  obligation                (65)     622      894     323
Unrecognized prior service
  cost                      331    1,427     (81)     746
Additional minimum
  liability                   -     (903)	     -   (2,262)
Net recorded pension
  asset (liability)     $   294 $   (281)  $  615 $ (659)
____________________________________
*Overfunded plans are those in which plan assets at fair value exceed 
the accumulated benefit obligation.  Underfunded plans are those in 
which the accumulated benefit obligation exceeds plan assets at fair 
value.

Prepaid pension cost included in intangible and other assets was
$294,000 and $615,000 at December 31, 1996 and 1995, respectively.
The pension intangible asset included in intangible and other assets was
$903,000 and $2,262,000 at December 31, 1996 and 1995, respectively.

A non-cash decrease of $1,359,000 and increase of $96,000 to the pension 
intangible asset and accrued pension liability was required to record 
the additional minimum liability in 1996 and 1995, respectively.

Assumptions used as of December 31 were:

                            	1996	  1995	  1994
Discount rate                7.25%  7.25%  8.50%
Rate of increase in
 compensation levels         5.00%  5.00%  5.00%
Expected long-term rate
 of return on assets         8.50%  8.50%  8.50%
_________________________________________________

At December 31, 1996 and 1995, all plan assets were primarily invested 
in listed stocks and bonds.

Certain company employees are covered under multi-employer union pension 
plans.  Amounts contributed under these plans were approximately 
$102,000, $105,000, and $113,000 for 1996, 1995 and 1994, respectively.

NOTE I-STOCK-BASED COMPENSATION PLANS
The company has two stock-based compensation plans: the 1991 Long-Term 
Incentive Plan which includes the facility to award both stock options 
and restricted stock and the Non-Employee Director Restricted Stock 
Plan.  In accounting for its employee compensation plans, the company 
applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," 
and related Interpretations.  Accordingly, no compensation expense is 
recognized for the company's stock options.  Compensation expense 
recognized for its employee restricted stock awards was $484,000 in 
1996.  The pro forma net income and earnings per share listed below 
reflect the impact of measuring compensation expense for options granted 
in 1995 and 1996 in accordance with the fair-value-based method 
prescribed by Statement of Accounting Standards No. 123, "Accounting for 
Stock-Based Compensation."  These amounts may not be representative of 
the effects on reported net income for future years as options vest over 
a three-year period and generally additional awards are made each year.



		                                      1996	     1995
Net income	As reported               $52,490   $43,212
	Pro forma                            51,453    42,735

Primary net income per	As reported   $  3.24   $  2.68
  share	Proforma                        3.18      2.65

Fully diluted net	As reported        $  3.07   $  2.55
  income per share	Proforma             3.01      2.52
_______________________________________________________

The weighted-average fair value of options granted was $7.90 per share 
in 1996 and $6.58 in 1995.  This estimate was based on using the Black-
Scholes multiple option-pricing model with the following weighted-
average assumptions:

                               	1996	     1995
Dividend yield                  2.36%     2.46%
Volatility                     31.79%    31.79%
Risk-free interest rates        6.43%     6.35%
Expected lives in years         3.75      3.73
_________________________________________________

Options are granted to officers and other key employees at an exercise 
price equal to the fair market value of the shares on the date of grant.  
Options become exercisable at a rate of 50% one year, 75% two years and 
100% three years after grant, and expire ten years after the date of 
grant (five years for options prior to 1995).  A summary of stock option 
activity follows:

_____________             1996_______            1995______________1994 
      
                	Number	Weighted	 Number	Weighted	Number	Weighted
	                of	    Average	  of	    Average	 of	    Average
	                Shares	Price	    Shares	Price	   Shares	Price   
	                 (000)	           (000)		         (000)              
Outstanding at
  January 1       615    $21.69    549   $18.15   527   $12.79
Granted           263     28.81    247    24.38   246    24.48
Exercised        (225)    19.14   (149)   13.39  (187)   11.04
Canceled          (28)    23.20    (32)   20.40   (37)   20.00
Outstanding at
  December 31     625    $25.54    615   $21.69   549    18.15
Options
  exercisable
  at December 31  206    $22.20   240   $18.42   216   $12.99
___________________________________

A summary of information regarding stock options outstanding December 
31, 1996 follows:

___________               Options Outstanding            Options 
                                                         Exercisable 
		                            Weighted
		                            Average	    Weighted	          	Weighted
	                 Number of	  Remaining	  Average	  Number of	Average
Range of Exercise	Shares	     Contractual	Exercise	 Shares	   Exercise
  Prices           	(000)	    Life	Price	            (000)	   Price    
$24.25-$28.81       576       7.67        $26.40    157       $24.32
$12.67-$16.08        49       1.12        $15.35     49       $15.35
___________________________________

The restricted stock award plan provides for awards of common stock to 
executive officers subject to resale restrictions.  The restrictions on 
outstanding awards are scheduled to lapse upon the achievement of 
certain performance objectives.  The company awarded 91,000 and 88,000 
shares in 1996 and 1995, respectively.  For both 

the stock options and restricted stock, as of December 31, 1996, 766,244 
shares were available for future awards.

Under the Non-Employee Director Restricted Stock Plan, directors who are 
not full-time employees of the company receive annual retainers 
equivalent to $15,000 in shares of common stock with any fractioned 
portion paid in cash.  The shares are issued each year after the 
company's annual meeting, are forfeitable if the director ceases to 
remain a director until the company's next annual meeting, and may not 
be sold for a period of five years, or until the director leaves the 
board.  As a group, non-employee directors received 4,080 shares in 
1996.

Note J-SUBSEQUENT EVENT
On January 13, 1997 the company acquired Lime Crest Corporation.  The 
total purchase price for the stock was $12.8 million.  The acquisition 
will be accounted for as a purchase and, accordingly, the company's 
consolidated financial statements will include the operating results 
from the date acquired.

management's responsibility for financial reporting

The accompanying consolidated financial statements of Medusa Corporation 
and subsidiaries have been prepared by management in conformity with 
generally accepted accounting principles and, in the judgment of 
management, present fairly and consistently the company's financial 
position and results of operations.  These statements by necessity 
include amounts that are based on management's best estimates and 
judgments and give due consideration to materiality.

The accounting systems and internal accounting controls of the company 
are designed to provide reasonable assurance that the financial records 
are reliable for preparing consolidated financial statements and 
maintaining accountability for assets and that, in all material 
respects, assets are safeguarded against loss from unauthorized use or 
disposition.  Qualified personnel throughout the organization maintain 
and monitor these internal accounting controls on an ongoing basis.  
Management continually monitors the system of internal control for 
compliance.  In addition, the company's internal auditor systematically 
reviews the adequacy and effectiveness of the controls and reports 
thereon.

The consolidated financial statements have been audited by Deloitte & 
Touche LLP, independent auditors, whose report appears on this page.

The Audit Committee of the Board of Directors, composed solely of 
outside directors, meets periodically with management, with the 
company's internal auditor, and with the independent auditors to review 
matters relating to the quality of financial reporting and internal 
accounting control and the nature, extent and results of their audits.  
The company's internal auditor and independent auditors have free access 
to the Audit Committee.


Robert S. Evans, Chairman of the Board

R. Breck Denny, Vice President - Finance & Treasurer

Edward A. Doles, Corporate Controller

independent auditors' report
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF MEDUSA CORPORATION:
We have audited the accompanying consolidated balance sheets of Medusa 
Corporation and subsidiaries (the "Company") as of December 31, 1996 and 
1995 and the related consolidated statements of income, shareholders' 
equity and of cash flows for each of the three years in the period ended 
December 31, 1996.  These financial statements are the responsibility of 
the Company's management.  Our responsibility is to express an opinion 
on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, 
in all material respects, the financial position of the Company at 
December 31, 1996 and 1995 and the results of its operations and its 
cash flows for each of the three years in the period ended December 31, 
1996 in conformity with generally accepted accounting principles.


Deloitte & Touche, LLP
Deloitte & Touche, LLP

Cleveland Ohio
January 27, 1997


five-year summary of financial data		Medusa Corporation and 
Subsidiaries


As of and for the Year Ended December 31	1996	1995	1994	1993	1992
________________________________________________________________________

	(In Thousands, except per 
share data, percents and ratios)
Net sales	                 $323,377	$293,327	$276,293	$248,038	$181,777

Operating profit	            81,579  	69,390	  52,107	  33,141	  16,914

Net interest expense        	(2,519)	 (5,350)	 (6,264)	 (5,916)	 (3,989)

Miscellaneous	                  145	    (193)	     (6)	   (500)	     93

Income before provision for
  taxes	                     79,205	  63,847  	45,837	  26,725	  13,018

Income taxes	                24,945	  20,635	  15,957	   8,526	   3,941

Income before cumulative effect
  of a change in accounting 	54,260	  43,212	  29,880	  18,199	   9,077

Extraordinary item (1996),
  Cumulative effect of a change
  in accounting (1993)	      (1,770)	      -	       -	     711	       -

Net income	                $ 52,490	$ 43,212	$ 29,880	$ 18,910	$  9,077
________________________________________________________________________

Income per common share:
  Primary	                    $3.35(A)	$2.68	   $1.81	   $1.12(B)	 $.56
  Fully diluted	              $3.17(A)	$2.55	   $1.76	   $1.12(B)	 $.56
________________________________________________________________________


Average number of shares
  outstanding	                     16,054	 16,018	   16,334	 16,268	   16,130
________________________________________________________________________


Other Financial Information
  Capital expenditures	          $ 19,806	$ 25,345	$ 14,694	$ 15,372	$ 11,548
  Payments for businesses
   acquired	                            -	      -	        -	  50,511	       -
  Depreciation and amortization	   14,253	 15,448	   13,830 	 13,958 	 12,703
  Total assets	                   223,446	219,578	  218,600	 204,177 	118,565
  Interest-bearing debt	            4,125 	61,665	   96,300	  96,300	  38,800
  Shareholders' equity	           153,970	 95,548	   59,973	  51,477	  34,974
  Capital employed	               158,095	157,213	  156,273	 147,777	  73,774
  Return on average capital
   employed	                           33%	    28%	      20%	     16%(C)	  13%
  Current ratio	                      2.6    	2.8	      1.5	     3.2	     2.5
  Cash flow(D)	                  $ 66,804$ 57,905	 $ 45,873	$ 32,229	$ 21,974
  %Cash flow to net sales	             21%	    20%	      17%	     13%	     12%
________________________________________________________________________

(A)Excluding ($.11) primary, ($.10) fully diluted for extraordinary 
charge from redemption of convertible subordinated notes.
(B)Excluding non-cash credit of $.04 per common share for cumulative 
effect of a change in accounting for income taxes.
(C)Calculated on income after extraordinary item (1996) and before 
cumulative effect of a change in accounting (1993).
(D)Income after extraordinary charge (1996) and before cumulative effect 
of a change in accounting (1993) plus depreciation and amortization, 
deferred income taxes, other non-cash charges or credits, and 
incremental charge for postretirement health benefit costs.



management's discussion and analysis
	
RESULTS OF OPERATIONS
Year 1996 Compared With 1995
Net sales for the year ended December 31, 1996, increased to $323.4 
million from $293.3 million in 1995.  Cement net sales rose 11% over 
last year as 6% unit volume increases and price increases implemented 
April 1, 1996 and April 1, 1995, resulted in 5% higher cement prices 
over 1995.  U.S. cement demand in 1996 exceeded 1995's record levels.  
Charlevoix, Clinchfield and Demopolis volume rose 7.9%, 7.3% and 6.5%, 
respectively, while Wampum's volume was flat.  These increases are 
chiefly attributed to the record U.S. demand as it affected the 
company's markets.

Aggregate's net sales for the year rose 6% over 1995 on 4% higher unit 
volume and 2% price increases.  Net sales at the company's highway and 
safety construction operation rose 16% over 1995.

Cost of sales as a percent of sales fell to 62.2% in 1996 compared with 
63.1% in 1995.  The reduction was due primarily to increased cement 
volumes and prices and continued high cement capacity utilization of 
94% in 1996 compared to 95% in 1995.  Fourth quarter 1996 cost of sales 
were also reduced by favorable physical inventory adjustments of $1.4 
million, principally from higher than estimated production realized at 
three of four cement plants.  However, a second quarter $1.2 million 
one-time pretax charge, $.8 million after-tax, or $.04 per common 
share, for the company's voluntary early retirement incentive program 
negotiated at the Wampum plant and higher annual worker's compensation 
costs partially offset the favorable impacts on cost of sales.

Depreciation and amortization expense decreased $1.1 million to $14.3 
million from $15.4 million in 1995. Lower levels of capital 
expenditures and the closure of Edinburg in 1995 which added $.9 
million of depreciation that year account for the decrease.

Selling, general and administrative expense as a percent of sales 
increased to 8.2% in 1996 from 8.0% in 1995.  Higher salaries, wages, 
related personnel costs, outside service costs, increased bad debt 
expenses and other inflationary pressures caused this overall increase.

Operating profit for 1996 of $81.6 million compares with $69.4 million 
in 1995.  The improvement in operating results can be attributed to the 
reasons discussed above.

Interest expense of $3.7 million decreased $3.9 million from $7.6 
million in 1995 resulting from  both the payment of $35.0 million of 
10% unsecured Senior Notes on December 15,  1995 and the conversion of 
the 6% convertible subordinated notes on December 2, 1996. Interest 
income decreased $1.1 million resulting from lower average cash and 
short-term investment balances as well as lower overall interest rates.

The company's effective tax rate of 31.5% for 1996 was lower than the 
federal statutory rate of 35% and the 32.3% in 1995 principally due to 
a higher percentage depletion deduction and lower effective state tax 
rates.

Per share amounts are all presented on a fully diluted basis, and for 
1996, after the extraordinary charge.  Net income for 1996 of $52.5 
million, or $3.07 per common share, compares with a net income of $43.2 
million, or $2.55 per common share, in 1995.

Environmental Matters
In common with other producers engaged in similar operations, the 
company is subject to a wide range of federal, state and local 
environmental laws and regulations pertaining to air and water quality, 
as well as the handling, treatment, storage, and disposal of waste 
materials.  Compliance with increasingly stringent standards has 
resulted in higher expenditures for both capital improvements and 
operating costs.  The company's policies stress environmental 
responsibility and regulatory compliance.  The company has recorded 
current and long-term accruals to reflect its environmental obligations, 
based on current information.  Subject to the three specific matters 
discussed below, management does not anticipate that regulatory 
compliance will have a material adverse effect on its results of 
operations, financial condition or liquidity.

The U.S. Environmental Protection Agency ("EPA") held a public meeting 
on April 26, 1996 concerning regulation of Cement Kiln Dust ("CKD").  
Collected in air pollution control devices, CKD is a by-product of 
cement manufacturing and is usually stored at plant sites.  A 1980 
amendment to the Resource Conservation and Recovery Act ("RCRA") 
exempted CKD from regulation as a hazardous waste (the so-called "Bevill 
Amendment").  Until new regulations become enforceable and "Tailored 
Management Standards" are set, CKD will remain exempt under the Bevill 
Amendment as a low toxicity/high volume waste.  Notice of new proposed 
rulemaking is expected from the EPA in November, 1997.  The proposal is 
expected to provide a "Conditional Exclusion" under the Tailored 
Management Standards for CKD, in lieu of more stringent "Management 
Standards" under Subtitle C of RCRA.  Under the Tailored Management 
Standards, CKD would retain its Bevill status, while CKD not so managed 
would be classed a hazardous waste subject to Subtitle C requirements of 
RCRA.  Through trade associations, Medusa and others in the industry, 
are urging EPA to allow the states to continue to regulate CKD.  The 
company has concluded preliminarily that CKD regulation is unlikely to 
have a material effect on the operations of the Demopolis, Alabama, 
Clinchfield, Georgia or the Wampum, Pennsylvania plants.  With respect 
to the Charlevoix, Michigan plant, the company is presently working with 
a consultant and the Michigan Department of Environmental Quality 
("MDEQ") on the design and licensing of an on-site CKD monofill and 
evaluating use of alternate raw materials to reduce CKD generation.  Due 
to the size and importance of the Charlevoix plant to the company's 
overall operations and the uncertainty of final CKD rulemaking, 
management is currently unable to conclude whether or not new CKD 
regulation is likely to have a material effect on the company's 
operations, financial condition or liquidity.

On June 21, 1991, a release of #2 fuel oil occurred at the Charlevoix 
plant.  The company immediately filed a report with MDEQ.  The matter 
was thoroughly investigated by MDEQ.  Under the supervision of MDEQ, the 
company immediately took measures, to preclude migration of the oil to 
surface water and beyond plant boundaries.  Data now available indicates 
such measures are effectively precluding migration.  The company 
regularly submits detailed reports to MDEQ concerning the status of 
affected areas.  The company has retained an environmental consultant to 
assist in remediation of the oil release.  In December, 1993 the company 
established a $1.4 million contingent liability on its books.  The 
charge represents management's current estimate of remediation costs.  
As additional information becomes available, changes in the estimate of 
the liability may be required.  The company will continue to examine 
remediation alternative at the site, none of which are now expected to 
have a material effect on the company's results of operations, financial 
condition or liquidity.

At the company's Wampum plant, kiln stack opacity is measured by 
continuous opacity monitors ("COM's").  Because the plant burns waste-
derived liquid fuel ("WDLF"), the Pennsylvania Department of 
Environmental Protection ("PaDEP") requires penalty payments for 
exceedences from main stack opacity standards.  Data recorded by the 
COM's is sent to PaDEP quarterly and a penalty obligation is incurred 
according to PaDEP policy.  Whenever a COM reading exceeds an opacity 
policy limit, WDLF burning ceases.  Recently, the state required a COM 
on the gravel bed filter stack (a device which removes dust from clinker 
cooler vent gas).  Such COM addition increased the company's opacity 
penalties. On January 11, 1996, the company met with PaDEP to discuss 
the causes of opacity excursions from the main stack and the gravel bed 
stack.  The company indicated that modifications would be made to 
clinker coolers #1 & #2 during the annual maintenance shut down. The 
company expects such will result in a reduction in clinker cooler vent 
volume and opacity exceedances from the gravel bed filter.  By 
agreement, penalties were held in abeyance pending results of the 
modifications.  After the modifications, the second quarter, 1996 
exceedences dropped significantly.  Although, for a 12-month period of 
1995 - 1996, the penalties were greater than $175,000, such penalties 
were compromised at $94,000.  On January 7, 1997 PaDEP notified the 
company that third quarter, 1996 penalties were $23,000, but stated that 
it was unable to accept any penalty payment due to EPA oversight.  
Management is currently unable to conclude whether PaDEP or EPA 
regulation of opacity from Wampum plant emission sources is likely to 
have a material effect on the company's results of operations, financial 
condition or liquidity.

RESULTS OF OPERATIONS
Year 1995 Compared With 1994
Net sales for the year ended December 31, 1995, increased to $293.3 
million from $276.3 million in 1994.  Cement net sales rose 7% over 
last year.  While cement unit volume for the period decreased by 3.5%, 
price increases implemented April 1, 1995, August 1, 1994, and April 1, 
1994, resulted in 12% higher cement prices over 1994.  U.S. demand in 
1995 approximated the record levels of 1994.  Wampum, Charlevoix and 
Demopolis volume fell 5.5%, 4.6% and 4.9%, respectively, while 
Clinchfield rose 2.8%.  These declines are chiefly attributed to 
competition from higher levels of cement imports, heavy mid-season 
rains and early winter conditions in the fourth quarter, low year end 
1994 inventory levels restricting sales particularly early in the year, 
and the company's maintenance of prices in lieu of volume.

Aggregate's sales from comparable operations for the year rose 1% over 
1994 on 1% higher selling prices and flat unit volume.  Sales from a 
closed operation were $.4 million in 1995 and $1.6 million in 1994.  In 
addition, the period reflected 9% higher sales for the company's 
highway and safety construction operation.

In August 1995, the company closed its Edinburg, Pennsylvania sand and 
gravel facility which was experiencing continued operating losses.  The 
facility contributed less than one-half of one percent to 1994 
consolidated sales.  A charge of $1.3 million, or $.05 per fully 
diluted share, was incurred to reflect the cost of the closing.  The 
net book value of the facility, less proceeds anticipated from asset 
sales, is recorded as additional depreciation expense of $.9 million.  
Other closing costs are recorded as additional cost of sales of $.4 
million.

Cost of sales as a percent of sales fell to 63.1% in 1995 compared with 
68.4% in 1994.  The reduction was due primarily to increased cement 
prices and improved cement capacity utilization of 95% in 1995 from 91% 
in 1994.  The fourth quarter 1995 settlement of insurance claims 
reduced cost of sales by $1.5 million.  Fourth quarter 1995 cost of 
sales were also reduced by favorable physical inventory adjustments of 
$1.5 million, principally from higher than estimated production 
realized at Charlevoix, and favorable adjustments for lower than 
estimated maintenance and stripping costs at the aggregates quarries.  
Increased kiln fuel cost and inflationary pressure on labor and fringes 
partially offset the favorable impacts on cost of sales.

Depreciation and amortization expense increased $1.6 million from $13.8 
million in 1994. The increase was due to the Edinburg closure as well 
as higher levels of capital expenditures in 1995 and 1994.

Selling, general and administrative expense as a percent of sales 
increased to 8.0% in 1995 from 7.7% in 1994.  Higher salaries, wages, 
related personnel costs, outside service costs and other inflationary 
pressures caused this overall increase.

Operating profit for 1995 of $69.4 million compares with $52.1 million 
in 1994.  The improvement in operating results can be attributed to the 
reasons discussed above.

Interest income increased by $963,000 for 1995 compared with 1994, due 
to higher levels of cash and short-term investments. Interest expense 
was approximately the same for both periods.

The company's effective tax rate of 32.3% for 1995 was lower than the 
federal statutory rate of 35% and the 34.8% in 1994 principally due to 
a higher percentage depletion deduction and lower effective state tax 
rates.

Per share amounts are all presented on a fully diluted basis.  Net 
income for 1995 of $43.2 million, or $2.55 per common share, compares 
with a net income of $29.9 million, or $1.76 per common share, in 1994.

Liquidity and Capital Resources

At December 31, 1996, the company had $25.0 million of cash and short-
term investments.  The company has available an unsecured $65.0 million 
five-year revolving credit facility for short-term working capital 
needs that expires December 31, 2001, and unsecured bank lines of 
credit totaling $20.0 million.  At December 31, 1996, no amounts were 
outstanding under any of these facilities.

Working capital at December 31, 1996, decreased $1.7 million from 
December 31, 1995, due principally higher levels of accrued incentive 
compensation, accrued insurance and accounts payable.  Increases in 
receivable and inventory balances were nearly offset by $8.1 million 
less in cash balances which is directly related to the $30.9 million 
payment on redemption of the convertible notes in December 1996.  The 
increases in the asset and liability accounts are related to the 
increases in profits and general business activities of the business.  
The ratio of current assets to current liabilities was 2.6:1 at 
December 31, 1996, and 2.8:1 at December 31, 1995.

Capital expenditures for 1996 were $19.8 million compared with $25.3 
million for 1995.  The continued high level of expenditures relate 
primarily to capital improvements to maintain our facilities current 
capacities, enhance productivity and reduce operating costs and are 
only limited by our ability to complete the work in a productive and 
efficient manner.

Due to a strong balance sheet and cash flow from operations, strength 
of the company's markets and a commitment to enhancing ongoing 
shareholder value, the company raised the quarterly dividend from 12 
cents to 15 cents, effective with the first quarter 1996.  This 
represents a 25% increase and was the second increase in dividend rates 
in just over two years.

The company's Board of Directors has authorized the purchase of 
outstanding shares, under which the company, in its discretion makes 
open market purchases from time-to-time.  The company purchased 441,000 
shares for $13.6 million during 1996.  The company intends to continue 
this program in 1997 as conditions warrant.

U.S. cement consumption hit record levels for the third consecutive year 
in 1996 as the construction sector posted moderate gains during the 
year.  Cement imports were down modestly in 1996 from 1995 levels and 
are expected to drop again in 1997.  The company expects its plants will 
continue to run full out in 1997 to meet continued strong demand.  
Reflecting these favorable trends the company has announced up to a 
$4.00 per ton price increase in all its markets effective April 1, 1997.



QUARTERLY RESULTS (UNAUDITED)
Summarized quarterly financial results for 1996 and 1995 appear in the 
table below (in thousands, except per share amounts):


		Net
Net	Gross	Income	      Earnings Per Share     
Sales	Profit	(Loss)	   Primary     	Fully Dilluted
1996
1st	              $ 45,073	$  7,999	$  1,192	$       .07	$       (a)
2nd	                85,995	  29,489	  14,969	        .93	        .87
3rd	               109,295	  39,259	  22,094	       1.38    	   1.27
4th	                83,014	  31,378	  14,235(b)      .87(b)	     .84(b)
                 	$323,377	$108,125	$ 52,490(b)	$   3.24(b)	$   3.07(b)
_________________________________________________________________

		Net
Net	Gross	Income	      Earnings Per Share     
Sales	Profit	(Loss)	   Primary     	Fully Dilluted
1995
1st	              45,620	 $  6,811	 $   (303)	  $   (.02)	$      (a)
2nd	              80,165	   26,768	   12,696	        .79	       .74
3rd	              94,827	   32,074	   16,373	       1.01       	.95
4th	              72,715 	  27,922	   14,446	        .89	       .84
	               $293,327	 $ 93,575	 $ 43,212	   $   2.68	  $   2.55
_________________________________________________________________

(a) Anti-dilutive
(b) After an extraordinary charge, net of income taxes, of $1,770
    or, $(.11) and $(.10) primary and fully dilluted per share,
    respectively.



MARKET AND DIVIDEND INFORMATION-COMMON SHARES

New York Stock Exchange Composite Price Per Share	Dividends Per Share

	               1996	   1995	              1996	    1995

           	High	     Low	 High	    Low

1st	       311/4	   251/4	  26	   213/8	 $   .15	 $  .125

2nd	       311/4		  281/4	  257/8	221/4	     .15	    .125

3rd	       325/8		  271/4	  285/8	245/8	     .15	    .125

4th	       351/8		  305/8	  281/4	231/8	     .15	    .125

                                    					$   .60 	$  .500
______________________________________________________________________
At December 31, 1996 there were approximately 4,486 holders of record of Medusa
common shares.