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 March 31, 1995

                                   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  1-8864 


                             USG CORPORATION
         (Exact name of registrant as specified in its charter)


               Delaware                                    36-3329400   
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification No.)


 125 South Franklin Street, Chicago, Illinois              60606-4678   
 (Address of principal executive offices)                  (Zip code)


Registrant's telephone number, including area code        (312) 606-4000

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 Section 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    

As of April 30, 1995, 45,088,634 shares of USG common stock were outstanding.



                     Table of Contents
                                             

PART I  FINANCIAL STATEMENTS
Item 1. Financial Statements:    

   Consolidated Statement of Earnings:
         Three Months Ended March 31, 1995 and 1994      
   
   Consolidated Balance Sheet:
         As of March 31, 1995 and December 31, 1994      

   Consolidated Statement of Cash Flows:
         Three Months Ended March 31, 1995 and 1994      

   Notes to Consolidated Financial Statements            

Item 2. Management's Discussion and Analysis of Results
     of Operations and Financial Condition               

Report of Independent Public Accountants                 

PART II  OTHER INFORMATION
Item 1. Legal Proceedings                                

Item 6. Exhibits and Reports on Form 8-K                 

SIGNATURES                                               




PART I   FINANCIAL INFORMATION
Item 1.  Financial Statements



                             USG CORPORATION
                   CONSOLIDATED STATEMENT OF EARNINGS
               (Dollars in millions except per share data)
                               (Unaudited)

                                                       Three Months ended
                                                            March 31,      
                                                        1995        1994   

                                                                 

Net sales                                             $    598    $    506 
 
Cost of products sold                                      446         396 
 
Gross profit                                               152         110 

Selling and administrative expenses                         60         57  
 
Amortization of excess reorganization value                 42          42 

Operating profit                                            50          11 

Interest expense                                            27         37  
 
Interest income                                             (2)         (3)

Other expense/(income), net                                  -           1 

Earnings/(loss) before taxes on income                      25         (24)

Taxes on income                                             27          10 
  
Net loss                                                    (2)        (34)

Net loss per common share                                (0.05)      (0.87)

Dividends paid per common share                              -          -  
 
Average number of common shares                     45,085,540  39,134,246 


See accompanying Notes to Consolidated Financial Statements.





                             USG CORPORATION
                       CONSOLIDATED BALANCE SHEET
                          (Dollars in millions)
                               (Unaudited)



                                                    As of          As of   
                                                  March 31,    December 31,
                                                                 
                                                    1995           1994    
Assets
Current Assets:
Cash and cash equivalents                       $        94    $       197 
Receivables (net of reserves - $16 and $14)             296           274  
Inventories                                             190            173 
Total current assets                                    580            644 

Property, plant and equipment (net of reserves
for depreciation and depletion - $90 and $80)           770            755 
Excess reorganization value (net of accumulated
amortization - $324 and $282)                           519            561 
Other assets                                            171            164 
Total Assets                                          2,040          2,124 


Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable                                        145            122 
Accrued expenses                                        217            253 
Notes payable                                             5              1 
Long-term debt maturing within one year                   3             44 
Taxes on income                                          51             35 
Total current liabilities                               421            455 

Long-term debt                                        1,018          1,077 
Deferred income taxes                                   177            179 
Other liabilities                                       426            421 

Stockholders' Equity/(Deficit):
Preferred stock                                           -              - 
Common stock                                              5              5 
Capital received in excess of par value                 221            221 
Deferred currency translation                            (5)           (13)
Reinvested earnings/(deficit)                          (223)          (221)
Total stockholders' equity/(deficit)                     (2)            (8)
Total Liabilities and Stockholders' Equity            2,040          2,124 


See accompanying Notes to Consolidated Financial Statements.




                             USG CORPORATION
                  CONSOLIDATED STATEMENT OF CASH FLOWS
                          (Dollars in millions)
                               (Unaudited)

                                                       Three Months ended
                                                            March 31,      
                                                        1995        1994   
                                                                 
                                                               
Operating Activities:
Net loss                                              $     (2)   $    (34)
Adjustments to reconcile net loss to net cash:
Amortization of excess reorganization value                 42          42 
Depreciation, depletion and other amortization              17          18 
Deferred income taxes                                       (2)          7 
Net (gain)/loss on asset dispositions                       (3)          - 
(Increase)/decrease in working capital:                                    
Receivables                                                (22)        (25)
Inventories                                                (17)        (21)
Payables                                                    39          15 
Accrued expenses                                           (36)          2 
Increase in other assets                                    (7)         (9)
Increase in other liabilities                                5           4 
Net cash flows (to)/from operating activities               14          (1)


Investing Activities:
Capital expenditures                                       (24)         (7)
Net proceeds from asset dispositions                         6           - 
Net cash flows to investing activities                     (18)         (7)


Financing Activities:
Issuance of debt                                             6         114 
Repayment of debt                                         (105)       (207)
Proceeds from public offering of common stock                -         224 
Net cash flows (to)/from financing activities              (99)        131 


Net increase/(decrease) in cash & cash equivalents        (103)        123 
Cash & cash equivalents at beginning of period             197         211 
Cash & cash equivalents at end of period                    94         334 


Supplemental Cash Flow Disclosures:
Interest paid                                               25          22 
Income taxes paid                                           13           4 


See accompanying Notes to Consolidated Financial Statements.




                             USG CORPORATION
               Notes to Consolidated Financial Statements
                               (Unaudited)


(1)The consolidated financial statements of USG Corporation and its
   subsidiaries ("USG" or the "Corporation") included herein have
   been prepared pursuant to the rules and regulations of the
   Securities and Exchange Commission.  In the opinion of management,
   the statements reflect all adjustments, which are of a normal
   recurring nature, necessary to present fairly the Corporation's
   financial position as of March 31, 1995 and December 31, 1994; and
   results of operations and cash flows for the three months ended
   March 31, 1995 and 1994.  While these interim financial statements
   and accompanying notes are unaudited, they have been reviewed by
   Arthur Andersen LLP, the Corporation's independent public
   accountants.  These financial statements and notes are to be read
   in conjunction with the financial statements and notes included in
   the Corporation's 1994 Annual Report on Form 10-K dated March 8,
   1995.


(2)In the fourth quarter of 1994, the Corporation established a
   revolving accounts receivable facility.  Under this new financing
   program, the trade receivables of United States Gypsum Company
   ("U.S. Gypsum") and USG Interiors, Inc. ("USG Interiors") are
   being purchased by USG Funding Corporation ("USG Funding") and
   transferred to a trust administered by Chemical Bank as trustee.
   Certificates representing an ownership interest of up to $130
   million in the trust have been issued to an affiliate of Citicorp
   North America, Inc.  USG Funding, a special purpose subsidiary of
   USG Corporation, is a separate corporate entity with its own
   separate creditors which will be entitled to be satisfied out of
   USG Funding's assets prior to any value in USG Funding becoming
   available to its shareholder.  Receivables and debt outstanding in
   connection with the receivables facility remain in receivables and
   long-term debt, respectively, on the Corporation's consolidated
   balance sheet.


(3)On May 6, 1993, the Corporation completed a comprehensive
   restructuring of its debt through implementation of a
   "prepackaged" plan of reorganization under United States
   bankruptcy law. The Corporation accounted for the restructuring
   using the principles of fresh start accounting as required by
   AICPA Statement of Position 90-7, "Financial Reporting by Entities
   in Reorganization under the Bankruptcy Code"  ("SOP 90-7"). 
   Pursuant to such principles, individual assets and liabilities
   were adjusted to fair market value.  Excess reorganization value,
   the portion of the reorganization value not attributable to
   specific assets, is being amortized over a five-year period,
   effective May 7, 1993.


 (4)Income tax expense amounted to $27 million and $10 million for the
   three months ended March 31, 1995 and 1994, respectively.  The
   Corporation's income tax expense is computed based on pre-tax
   earnings excluding the non-cash amortization of excess
   reorganization value, which is not deductible for federal income
   tax purposes.  Further, under the provisions of SOP 90-7, the
   benefits of the domestic net operating loss carryforwards ("NOL
   Carryforwards") discussed below are not reflected in income tax
   expense.

   The Corporation has NOL Carryforwards of $49 million remaining
   from 1992.  These NOL Carryforwards may be used to offset U.S.
   taxable income through 2007.  The Internal Revenue Code limits the
   Corporation's annual use of its NOL Carryforwards to the lesser of
   its taxable income or approximately $30 million plus any unused
   limit from prior years.  Furthermore, due to the uncertainty
   regarding the application of the Internal Revenue Code to the
   exchange of stock for debt, the Corporation's NOL Carryforwards to
   1994 and later years could be reduced or eliminated.  The
   Corporation has a $4 million minimum tax credit which may be used
   to offset U.S. regular tax liability in future years.


(5)As of March 31, 1995, 2,750,555 common shares were reserved for
   future issuance in conjunction with existing stock option grants. 
   An additional 11,105 common shares were reserved for future
   grants.


(6)One of the Corporation's operating subsidiaries, U.S. Gypsum, is a
   defendant in asbestos lawsuits alleging both property damage and
   personal injury.  Virtually all costs of the Personal Injury Cases
   are being paid by insurance.  However, many of U.S. Gypsum's
   insurance carriers are denying coverage for the Property Damage
   Cases, although U.S. Gypsum believes that substantial coverage
   exists and the trial court and an appellate court in U.S. Gypsum's
   Coverage Action have so ruled.  The carriers are seeking
   reconsideration of the Illinois Supreme Court's refusal to review
   the appellate court's ruling.  In view of the limited insurance
   funding currently available to U.S. Gypsum for Property Damage
   Cases resulting from continued resistance by a number of U.S.
   Gypsum's insurers to providing coverage, the effect of the
   asbestos litigation on the Corporation will depend upon a variety
   of factors, including the damages sought in Property Damage Cases
   that reach trial prior to the completion of the Coverage Action,
   U.S. Gypsum's ability to successfully defend or settle such cases,
   and the resolution of the Coverage Action.  As a result,
   management is unable to determine whether an adverse outcome in
   the asbestos litigation will have a material adverse effect on the
   results of operations or the consolidated financial position of
   the Corporation.


   The Corporation and certain of its subsidiaries have been notified
   by state and federal environmental protection agencies of possible
   involvement as one of numerous "potentially responsible parties"
   in a number of so-called "Superfund" sites in the United States. 
   The Corporation believes that neither these matters nor any other
   known  governmental proceeding regarding environmental matters
   will have a  material adverse effect upon its earnings or
   consolidated financial position.

(7)On January 1, 1985, all of the issued and outstanding shares of
   stock of U.S. Gypsum were converted into shares of USG Corporation
   and the holding company became a joint and several obligor for
   certain debentures originally issued by U.S. Gypsum.  Debentures
   totaling $22 million and $33 million were recorded on the holding
   company's books of account as of March 31, 1995 and December 31,
   1994, respectively.  Summary financial results for U.S. Gypsum are
   presented below (dollars in millions):





                                                       Three Months ended
                                                            March 31,      
         Summary Statement of Earnings                        1995        1994   
                                                                       

         Net sales                                          $    332    $    269 
         Cost and expenses                                       255         224 
         Amortization of excess reorganization value              15          15 
         Operating profit                                         62          30 
         Interest expense, net                                     -           - 
         Corporate charges                                        22          24 
         Earnings before taxes on income                          40           6 
         Taxes on income                                          21           9 
         Net earnings/(loss)                                      19          (3)
   



                                                        As of       As of
                                                      March 31,   Dec. 31,
   Summary Balance Sheet                                1995        1994   
                                                                 

   Current assets                                     $    381   $     345 
   Property, plant and equipment, net                      503         491 
   Excess reorganization value, net                        189         204 
   Other assets                                            106         103 
   Total assets                                          1,179       1,143 

   Current liabilities                                     212         197 
   Other liabilities and obligations                       256         256 
   Stockholder's equity                                    711         690 
   Total liabilities and stockholder's equity            1,179       1,143 



(8)As of March 31, 1995, $298 million aggregate principal amount of
   10 1/4% senior notes due 2002 were outstanding.  Each of U.S. Gypsum, USG
   Industries, Inc., USG Interiors, USG Foreign Investments, Ltd.,
   L&W Supply Corporation, Westbank Planting Company, USG Interiors
   International, Inc., American Metals Corporation and La Mirada
   Products Co., Inc. (together, the "Combined Guarantors")
   guaranteed, in the manner described below, the obligations of the
   Corporation under its bank term loans' credit agreement and 10 1/4%
   senior notes.  The Combined Guarantors are jointly and
   severally liable under the guarantees.  Holders of the bank term
   loans  have the right to: (i) determine whether, when and to what
   extent the guarantees will be enforced (provided that each
   guarantee payment will be applied to the bank term loans and 10
   1/4% senior notes pro rata based on the respective amounts owed
   thereon); and (ii) amend or eliminate the guarantees.  The
   guarantees will terminate when the bank term loans are  retired
   regardless of whether any such 10 1/4% senior notes remain
   unpaid.  The liability of each of the Combined Guarantors on
   its guarantee is limited to the greater of: (i) 95% of the lowest
   amount, calculated as of July 13, 1988, sufficient to render the
   guarantor insolvent, leave the guarantor with unreasonably small
   capital or leave the guarantor unable to pay its debts as they
   become due (each as defined under applicable law); and (ii) the
   same amount, calculated as of the date any demand for payment
   under such guarantee is made, in each case plus collection costs. 
   The guarantees are senior obligations of the applicable guarantor
   and rank pari passu with all unsubordinated obligations of the
   guarantor.

   Subsidiaries other than the Combined Guarantors (the "Combined
   Non-Guarantors"), substantially all of which are subsidiaries of
   Guarantors,  primarily include CGC Inc., Gypsum Transportation
   Limited, USG Canadian Mining Ltd. and the Corporation's Mexican,
   European and Pacific subsidiaries.  USG Funding is also a Non-Guarantor.
   The long-term debt of the Combined Non-Guarantors of $84 million as of
   March 31, 1995 and December 31, 1994, has restrictive covenants that
   restrict, among other things, the payment of dividends.

   The following condensed consolidating information presents:

   (i)   Condensed financial statements as of March 31, 1995
         and December 31, 1994 and for the three months ended
         March 31, 1995 and 1994 of (a) the Corporation on a
         parent company only basis, (b) the Combined
         Guarantors, (c) the Combined Non-Guarantors and (d)
         the Corporation on a consolidated basis. Except for
         the following condensed financial statements, separate
         financial information with respect to the Combined
         Guarantors is not deemed material to investors and is
         omitted.)

   (ii)  The Parent Company and Combined Guarantors shown with
         their investments in their subsidiaries accounted for
         on the equity method.

   (iii) Elimination entries necessary to consolidate the
         Parent Company and its subsidiaries.





                                  USG CORPORATION
                   CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
                               (Dollars in millions)

                                                    Combined
                             Parent     Combined      Non-
                             Company   Guarantors  Guarantors Eliminations Consolidated 
                                                                 
Three Months ended 3/31/95
Net sales                  $       -   $     530  $       97  $      (29) $     598 
Gross profit/(loss)                -         132          20           -        152 
Operating profit/(loss)          (10)         59           1           -         50 
Equity in net (earnings)/loss
of the subsidiaries                4           -           -          (4)         - 
Interest expense, net             23           -           2           -         25 
Corporate service charge         (38)         41          (3)          -          - 
Other expense/(income), net       (1)          3          (2)          -          - 
Earnings/(loss) before taxes on
income                             2          15           4           4         25 
Taxes on income                    4          20           3           -         27 
Net earnings/(loss)               (2)         (5)          1           4         (2)





Three Months ended 3/31/94
Net sales                        $         -  $        443  $        88   $       (25) $       506 
Gross profit/(loss)                        -            92           18             -          110 
Operating profit/(loss)                   (9)           21           (1)            -           11 
Equity in net (earnings)/loss
  of the subsidiaries                     32             4            -           (36)           - 
Interest expense, net                     33             -            1             -           34 
Corporate service charge                 (42)           42            -             -            - 
Other expense/(income), net                1             -            -             -            1 
Earnings/(loss) before taxes on               
  income                                 (33)          (25)          (2)           36          (24)
Taxes on income                            1             7            2             -           10 
Net earnings/(loss)                      (34)          (32)          (4)           36          (34)




                                          USG CORPORATION
                               CONDENSED CONSOLIDATING BALANCE SHEET
                                              (Dollars in millions)


                                                                      Combined
                                         Parent        Combined         Non-
As of 3/31/95                            Company      Guarantors     Guarantors    Eliminations   Consolidated 
                                                                                  

Cash and cash equivalents            $          79  $          (9) $          24  $           -  $          94 
Receivables, net                                 1            138            194            (37)           296 
Inventories                                      -            144             50             (4)           190 
    Total current assets                        80            273            268            (41)           580 
Property, plant and equipment, net              15            633            122              -            770 
Investment in subsidiaries                   1,441            268              -         (1,709)             - 
Excess reorganization value, net                 -            414            105              -            519 
Other assets                                  (241)           440            (30)             2            171 
    Total assets                             1,295          2,028            465         (1,748)         2,040 

Accounts payable and accrued
    expenses                                    77            307             65            (36)           413 
Notes payable and LTD maturing
    within one year                              -              2              6              -              8 
    Total current liabilities                   77            309             71            (36)           421 
Long-term debt                                 897             37             84              -          1,018 
Deferred income taxes                            6            154             16              1            177 
Other liabilities                              312            109              4              1            426 

Common stock                                     5              1              6             (7)             5 
Capital received in excess
    of par value                               221          1,438            364         (1,802)           221 
Deferred currency translation                    -              -             (5)             -             (5)
Reinvested earnings/(deficit)                 (223)           (20)           (75)            95           (223)
    Total stockholders' equity/
       (deficit)                                 3          1,419            290         (1,714)            (2)
    Total liabilities and
       stockholders' equity                  1,295          2,028            465         (1,748)         2,040 



As of 12/31/94
Cash and cash equivalents            $         178  $         (11) $          30  $           -  $         197 
Receivables, net                                 -            135            173            (34)           274 
Inventories                                      -            136             43             (6)           173 
    Total current assets                       178            260            246            (40)           644 
Property, plant and equipment, net              15            623            117              -            755 
Investment in subsidiaries                   1,436            261              -         (1,697)             - 
Excess reorganization value, net                 -            447            114              -            561 
Other assets                                  (227)           426            (28)            (7)           164 
    Total assets                             1,402          2,017            449         (1,774)         2,124 

Accounts payable and accrued
    expenses                                    83            298             63            (34)           410 
Notes payable and LTD maturing
    within one year                             41              2              2              -             45 
    Total current liabilities                  124            300             65            (34)           455 
Long-term debt                                 956             37             84              -          1,077 
Deferred income taxes                            9            155             15              -            179 
Other liabilities                              308            109              4              -            421 

Common stock                                     5              1              6             (7)             5 
Capital received in excess
    of par value                               221          1,438            364         (1,802)           221 
Deferred currency translation                    -              -            (13)             -            (13)
Reinvested earnings/(deficit)                 (221)           (23)           (76)            99           (221)
    Total stockholders' equity/
       (deficit)                                 5          1,416            281         (1,710)            (8)
    Total liabilities and
       stockholders' equity                  1,402          2,017            449         (1,744)         2,124 




                                                 USG CORPORATION
                                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                              (Dollars in millions)

                                                                      Combined
                                         Parent        Combined         Non-
Three Months ended 3/31/95               Company      Guarantors     Guarantors    Eliminations   Consolidated 
                                                                                  

Net cash flows (to)/from
    operating activities             $         (42) $          67  $         (11) $           -  $          14 
    Capital expenditures                         -            (21)            (3)             -            (24)
    Net proceeds from asset
       dispositions                              -              -              6              -              6 
Net cash flows (to)/from
    investing activities                         -            (21)             3              -            (18)
    Issuance of debt                             -              -              6              -              6 
    Repayment of debt                         (102)             -             (3)             -           (105)
    Cash dividends (paid)/received               -              1             (1)             -              - 
    Net cash transfers (to)/from
       corporate                                45            (45)             -              -              - 
Net cash flows (to)/from:
    financing activities                       (57)           (44)             2              -            (99)
Net increase/(decrease) in cash
    & cash equivalents                         (99)             2             (6)             -           (103)
Cash & cash equivalents - beginning            178            (11)            30              -            197 
Cash & cash equivalents - end                   79             (9)            24              -             94 


Three Months ended 3/31/94
Net cash flows (to)/from
    operating activities             $         (23) $          17  $           5  $           -  $          (1)
    Capital expenditures                         -             (6)            (1)             -             (7)
    Net proceeds from asset
       dispositions                              -              -              -              -              - 
Net cash flows (to)/from
    investing activities                         -             (6)            (1)             -             (7)
    Issuance of debt                            85              -             29              -            114 
    Repayment of debt                         (189)             -            (18)             -           (207)
    Proceeds from stock offering               224              -              -              -            224 
    Cash dividends (paid)/received               -             11            (11)             -              - 
    Net cash transfers (to)/from
       corporate                                26            (26)             -              -              - 
Net cash flows (to)/from
    financing activities                       146            (15)             -              -            131 
Net increase/(decrease) in cash
    & cash equivalents                         123             (4)             4              -            123 
Cash & cash equivalents - beginning            187             (8)            32              -            211 
Cash & cash equivalents - end                  310            (12)            36              -            334 


Item 2.     Management's Discussion and Analysis of Results of Operations and
            Financial Condition


Results of Operations

Comparing the first three months of 1995 and 1994, net sales increased $92
million, or 18.2%.  Improved sales were reported for each of USG Corporation's
core businesses, North American Gypsum and Worldwide Ceilings, as a result of
strong housing starts in the fourth quarter of 1994, growth in repair and
remodel activity and improving commercial and institutional construction.

Gross profit as a percentage of net sales rose to 25.4% from 21.7% due to
higher selling prices for all major product lines.

Selling and administrative expenses increased $3 million, or 5.3%.  However,
as a percentage of net sales, these expenses improved to 10.0% from 11.3%.

Amortization of excess reorganization value, which was established in
connection with USG's financial restructuring in May 1993 and is being
amortized over a five-year period, reduced operating profit by $42 million in
each first quarter period.

Because of the continuing amortization of excess reorganization value, USG
reports EBITDA (earnings before interest, taxes, depreciation, depletion and
amortization) to facilitate comparisons of current and historical results. 
EBITDA amounted to $106 million in the first three months of 1995, an increase
of $40 million, or 60.6%, versus the corresponding 1994 period.  (Note: EBITDA
should not be considered as an alternative to net earnings as an indicator of 
operating performance or to cash flows as a measure of overall liquidity.)

Interest expense in the first three months of 1995 declined $10 million, or
27.0%, compared with the first three months of 1994 primarily reflecting a
$389 million net reduction of debt principal since March 31, 1994. 

Income tax expense amounted to $27 million and $10 million for the three
months ended March 31, 1995 and 1994, respectively.  The Corporation's income
tax expense is computed based on pre-tax earnings excluding the non-cash
amortization of excess reorganization value, which is not deductible for
federal income tax purposes.  Further, the benefits of the NOL Carryforwards
are not reflected in income tax expense.

Net losses of $2 million and $34 million were reported in the first three
months of 1995 and 1994, respectively.  However, the non-cash amortization of
excess reorganization value and reorganization debt discount (included in
interest expense) reduced net earnings by $43 million, or $0.96 per share, and
$46 million, or $1.17 per share, in the respective quarters. 
The following is an analysis of USG's results of operations by core business
(dollars in millions):





                                                             Three Months ended March 31,              
                                                        Net Sales                       EBITDA         
                                                  1995           1994            1995            1994  
                                                                                       

North American Gypsum:
U.S. Gypsum Company                             $   332        $   269             $86             $53 
L&W Supply Corporation                              174            139               4               1 
CGC Inc. (gypsum)                                    25             24               3               2 
Other subsidiaries                                   17             19               5               5 
Eliminations                                        (78)           (63)              -               - 
Total North American Gypsum                         470            388              98              61 

Worldwide Ceilings:
USG Interiors, Inc.                                  95             96              15              13 
USG International                                    56             45               2               1 
CGC Inc. (interiors)                                  8              8               1               1 
Eliminations                                        (10)            (9)              -               - 
Total Worldwide Ceilings                            149            140              18              15 

Corporate                                             -              -             (10)            (10)
Eliminations                                        (21)           (22)              -               - 
Total USG Corporation                               598            506             106              66 

 

North American Gypsum

Net sales of $470 million increased $82 million, or 21.1%, and EBITDA of $98
million increased $37 million, or 60.7%, over the first three months of 1994.

For U.S. Gypsum, improved results were driven by the continuing strong demand
for gypsum wallboard and related products.  Despite unfavorable weather
conditions in several parts of the United States, wallboard shipments in the
first quarter of 1995 totalled 1.925 billion square feet, a first quarter
record and an increase of 3% over the prior-year period.  U.S. Gypsum's
wallboard plants operated at 96% of capacity in the first three months of 1995
compared to an industry average of 93%.  Realized selling prices for wallboard
averaged $112.26 per thousand square feet, up 25% and 5% compared to the first
and fourth quarters of 1994, respectively.  However, improved wallboard
margins resulting from the higher selling prices were partially offset by
increased unit manufacturing costs as a result of the rising cost of purchased
waste paper.  Compared to the fourth quarter of 1994, rising waste paper costs
resulted in a $2.50 per thousand square feet increase in wallboard unit
manufacturing costs.  Based on preliminary data issued by the U.S. Bureau of
the Census, first quarter 1995 seasonally adjusted annual housing starts
averaged 1.297 million privately owned units,  down 5% from the average
reported a year ago for 1994.  Due to the lagged effect on demand for
wallboard, first quarter 1995 housing starts will impact second quarter
shipments.  Approximately 50% of industry demand for wallboard is generated by
new housing starts. 

L&W Supply Corporation, USG's building products distribution business,
experienced the highest level of first quarter net sales in its history.  This
performance resulted from record sales of gypsum products, which account for
approximately 50% of L&W Supply's total sales, and increased sales of most
non-gypsum product lines.  Improved results for non-gypsum products were led
by drywall metal, ceiling products and insulation.

Results for CGC Inc.'s gypsum business reflect low levels of new residential
construction in eastern Canada, offset by export opportunities and growth in
the repair and remodel market.  Consequently, CGC's net sales and EBITDA
improved slightly compared to the first three months of 1994 due to higher
wallboard selling prices and increased shipments of wallboard to the United
States, offset to a large extent by decreased shipments in eastern Canada.     
  



Worldwide Ceilings

Net sales of $149 million increased $9 million, or 6.4%, and EBITDA of $18
million increased $3 million, or 20.0%, over the first three months of 1994.

Slightly lower net sales for USG Interiors reflect the absence of results in
1995 for the floor division which was divested in December 1994. Excluding
floor division results in 1994, net sales and EBITDA for USG Interiors
increased 7.2% and 15.4%, respectively.  These improvements reflect higher
average selling prices for ceiling tile and grid and record first quarter
ceiling tile shipments largely due to strong retail and export sales.     

USG International reported increased sales in all three of its principal
geographic markets: Europe, Latin America and the Pacific.  Results for Europe
benefited from records in production volume, cost performance and net sales.





Liquidity and Capital Resources

The Corporation significantly strengthened its liquidity and capital resources
through its 1993 financial restructuring and subsequent refinancing
activities.  A major financial objective of the Corporation following its 1993
restructuring has been to deleverage its balance sheet.  Since May 1993,
outstanding debt has been reduced by over $500 million, eliminating most
scheduled maturities until 2000.  In the absence of significant unanticipated
cash demands, the Corporation believes that cash generated by operations and
the estimated levels of liquidity available to it will be sufficient to
satisfy its debt service requirements and other capital requirements.

As of March 31, 1995, working capital (current assets less current
liabilities) amounted to $159 million and the ratio of current assets to
current liabilities was 1.38 to 1, versus December 31, 1994 when working
capital amounted to $189 million and the ratio of current assets to current
liabilities was 1.42 to 1.  

In the first three months of 1995, cash and cash equivalents decreased to $94
million from $197 million primarily due to a net reduction in debt of $99
million.  First quarter debt repayments included $91 million of bank term
loans, $41 million of which satisfied the remaining 1994 cash sweep obligation
in accordance with the bank term loans' credit agreement.  Receivables (net of
reserves) increased $22 million, or 8.0%, to $296 million, inventories
increased $17 million, or 9.8%, to $190 million and accounts payable increased
$23 million, or 18.9%, to $145 million.  These increases primarily reflect
normal seasonal fluctuations.

In the first quarter of 1995, USG's bank term loans' credit agreement was
amended for the fourth time since the 1993 financial restructuring.  The
principal change will permit USG to use excess cash flows generated in the
course of a year to make debt paydowns on senior debt and bank term loans in
equal amounts at any time during the year, which under the former cash sweep
provisions of the credit agreement was limited to year-end payments.  This
amendment also provides enhanced financial flexibility in the areas of, among
others, repurchases of certain public debt and capital spending.

Capital expenditures amounted to $24 million in the first three months of
1995, compared with $7 million in the corresponding 1994 period.  The
Corporation expects that capital expenditures will exceed $100 million in
1995.  Substantial capital investments underway at U.S. Gypsum include various
projects that will be completed in 1995 to increase wallboard capacity by 600
million square feet through line accelerations and to reduce manufacturing
costs.  USG Interiors announced a $45 million expansion of its ceiling tile
plant in Greenville, Miss., scheduled for completion in 1996 and L&W Supply
continues to expand by adding distribution centers and diversifying its
product offerings.  As of March 31, 1995, capital expenditure commitments for
the replacement, modernization and expansion of operations amounted to $102
million compared with $61 million as of December 31, 1994.  The Corporation's
capital investment plans for the next several years anticipate spending at, or
above, current levels so long as operating cash flows support such levels and
the growth opportunities for such investments remain attractive.  The
Corporation periodically evaluates possible acquisitions or combinations
involving other businesses or companies in businesses and markets related to
the Corporation's current operations, and the Corporation believes that its
available liquidity would be generally adequate to support appropriate
opportunities.

One of the Corporation's subsidiaries, U.S. Gypsum, is a defendant in asbestos
lawsuits alleging both property damage and personal injury.  Virtually all
costs of the Personal Injury Cases are being paid by insurance.  However, many
of U.S. Gypsum's insurance carriers are denying coverage for the Property
Damage Cases, although U.S. Gypsum believes that substantial coverage exists
and the trial court and an appellate court in U.S. Gypsum's Coverage Action
have so ruled.  The carriers are seeking reconsideration of the Illinois
Supreme Court's refusal to review the appellate court's ruling.  In view of
the limited insurance funding currently available to U.S. Gypsum for Property
Damage Cases resulting from continued resistance by a number of U.S. Gypsum's
insurers to providing coverage, the effect of the asbestos litigation on the
Corporation will depend upon a variety of factors, including the damages
sought in Property Damage Cases that reach trial prior to the completion of
the Coverage Action, U.S. Gypsum's ability to successfully defend or settle
such cases, and the resolution of the Coverage Action.  As a result,
management is unable to determine whether an adverse outcome in the asbestos
litigation will have a material adverse effect on the results of operations or
the consolidated financial position of the Corporation.

The Corporation and certain of its subsidiaries have been notified by state
and federal environmental protection agencies of possible involvement as one
of numerous "potentially responsible parties" in a number of so-called
"Superfund" sites in the United States.  The Corporation believes that neither
these matters nor any other known governmental proceeding regarding
environmental matters will have a material adverse effect upon its earnings or
consolidated financial position.  See Part II, Item 1. "Legal Proceedings" for
more information on legal proceedings.




                                REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
USG Corporation:

We have reviewed the accompanying condensed consolidated balance sheet of USG
CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of March 31, 1995,
and the related condensed consolidated statement of earnings and the condensed
consolidated statement of cash flows for the three-month period ended March
31, 1995.  These financial statements are the responsibility of the Company's
management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants.  A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters.  It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.

As discussed in Note 6, in view of the limited insurance funding currently
available for property damage cases resulting from the continued resistance by
a number of U.S. Gypsum's insurers to providing coverage, the effect of the
asbestos litigation on the Corporation will depend upon a variety of factors,
including the damages sought in property damage cases that reach trial prior
to the completion of the coverage action, U.S. Gypsum's ability to
successfully defend or settle such cases, and the resolution of the coverage
action.  As a result, management is unable to determine whether an adverse
outcome in the asbestos litigation will have a material adverse effect on the
consolidated results of operations or the consolidated financial position of
the Corporation.



                                    /s/ Arthur Andersen LLP


                                    ARTHUR ANDERSEN LLP

Chicago, Illinois
April 21, 1995




PART II.      OTHER INFORMATION
Item 1.       Legal Proceedings


Asbestos Litigation

One of the Corporation's subsidiaries, U.S. Gypsum, is among numerous
defendants in lawsuits arising out of the manufacture and sale of asbestos-
containing building materials.  U.S. Gypsum sold certain asbestos-containing
products beginning in the 1930's; in most cases the products were discontinued
or asbestos was removed from the product formula by 1972, and no asbestos-
containing products were sold after 1977.  Some of these lawsuits seek to
recover compensatory and in many cases punitive damages for costs associated
with maintenance or removal and replacement of products containing asbestos
(the "Property Damage Cases").  Others of these suits (the "Personal Injury
Cases") seek to recover compensatory and in many cases punitive damages for
personal injury allegedly resulting from exposure to asbestos and asbestos-
containing products.  It is anticipated that additional personal injury and
property damage cases containing similar allegations will be filed.

As discussed below, U.S. Gypsum has substantial personal injury and property
damage insurance for the years involved in the asbestos litigation.  Prior to
1985, when an asbestos exclusion was added to U.S. Gypsum's policies, U.S.
Gypsum purchased comprehensive general liability insurance policies covering
personal injury and property damage in an aggregate face amount of
approximately $850 million.  Insurers that issued approximately $106 million
of these policies are presently insolvent.  After deducting insolvencies and
exhaustion of policies, approximately $550 million of insurance remained
potentially available as of December 31, 1994.  Because U.S. Gypsum's
insurance carriers initially responded to its claims for defense and
indemnification with various theories denying or limiting coverage and the
applicability of their policies, U.S. Gypsum filed a declaratory judgment
action against them in the Circuit Court of Cook County, Illinois on December
29, 1983.  (U. S. Gypsum Co. v. Admiral Insurance Co., et al.) (the "Coverage
Action").  U.S. Gypsum alleges in the Coverage Action that the carriers are
obligated to provide indemnification for settlements and judgments and, in
some cases, defense costs incurred by U.S. Gypsum in property damage and
personal injury claims in which it is a defendant.  The current defendants are
ten insurance carriers that provided comprehensive general liability insurance
coverage to U.S. Gypsum between the 1940's and 1984.  As discussed below,
several carriers have settled all or a portion of the claims in the Coverage
Action.

U.S. Gypsum's aggregate expenditures for all asbestos-related matters,
including property damage, personal injury, insurance coverage litigation and
related expenses, exceeded aggregate insurance payments by $25.8 million in
1992, $8.2 million in 1993, and $33.4 million in 1994.


Property Damage Cases

The Property Damage Cases have been brought against U.S. Gypsum by a variety
of plaintiffs, including school districts, state and local governments,
colleges and universities, hospitals and private property owners.  As of March
31, 1995, 40 Property Damage Cases were pending against U.S. Gypsum; however,
the number of buildings involved is greater than the number of cases because
many of these cases, including the class actions referred to below, involve
multiple buildings.  In addition, approximately 37 property damage claims have
been threatened against U.S. Gypsum.  U.S. Gypsum has denied the substantive
allegations of each of the Property Damage Cases and intends to defend them
vigorously except when advantageous settlements are possible.

U.S. Gypsum is one of many defendants in three pending cases that have been
certified as class actions and others that request such certification.  On
April 10, 1992, a state court in Philadelphia certified a class consisting of
all owners of buildings leased to the federal government.  (Prince George
Center, Inc. v. U.S. Gypsum Co., et al., Court of Common Pleas, Philadelphia,
Pa.)  On September 4, 1992, a Federal district court in South Carolina
conditionally certified a class comprised of all colleges and universities in
the United States, which certification is presently limited to the resolution
of certain allegedly "common" liability issues.  (Central Wesleyan College v.
W.R. Grace & Co., et al, U.S.D.C. S.C.).  

In October 1994, U.S. Gypsum executed agreements to settle two other class
actions (one of which has now been closed), subject to court approval
following notice to the respective classes.  One suit was brought on behalf of
owners and operators of all elementary and secondary schools in the United
States that contain or contained friable asbestos-containing material.  (In re
Asbestos School Litigation, U.S.D.C, E.D. Pa.)  Approximately 1,350 school
districts opted out of the class, some of which have filed or may file
separate lawsuits.  The other class action settlement involved approximately
333 school districts in Michigan that had opted out of the nationwide class
action.  Board of Education of the City of Detroit, et al. v. The Celotex
Corp., et al., Circuit Court for Wayne County, MI.)  The Corporation took a
$30 million charge to pretax earning in the fourth quarter of 1994 primarily
to cover the cash payments, approximately two-thirds of which was paid in 1994
with the rest payable over the next two years.  In addition, U.S. Gypsum will
issue discount coupons to the school districts in the nationwide class action
for the purchase of plaster products.  The coupons, which will be redeemable
over ten years subject to annual "caps," will have an aggregate face amount of
$50 million.  The Michigan settlement was approved by the Court on December 2,
1994, and no appeal was filed.  The settlement of the nationwide class action
has not yet been presented to the Court for approval.

A case pending in state court in South Carolina, which has not been certified
as a class action, purports to be a "voluntary" class action on behalf of
owners of all buildings containing certain types of asbestos-containing
products manufactured by the nine named defendants, including U.S. Gypsum,
other than buildings owned by the federal or state governments, single family
residences, or buildings at issue in the other described class actions. 
(Anderson County Hospital v. W.R. Grace & Co., et al., Court of Common Pleas,
Hampton Co., S.C. (the "Anderson case")).  The Anderson case also names the
Corporation as a defendant, alleging, among other things, that the guarantees
executed by U.S. Gypsum in connection with the 1988 Recapitalization, as well
as subsequent distributions of cash from U.S. Gypsum to the Corporation,
rendered U.S. Gypsum insolvent and constitute a fraudulent conveyance.  In
July 1994, the court in the Anderson case ruled that claims involving building
owners outside South Carolina cannot be included in the suit.  A case which
has yet to be certified as a class action was filed in federal court in the
Eastern District of Texas on August 8, 1994.  (Kirbyville Independent School
District v. U.S. Gypsum, et al., United States District Court for the Eastern
District of Texas, Beaumont Division).  The case purports to be a class action
on behalf of all public building owners and political subdivisions of the
State of Texas, including all cities, counties and municipalities.  The
damages claimed against U.S. Gypsum in the class action cases are unspecified.

In total, U.S. Gypsum has settled approximately 94 Property Damage Cases,
involving 210 plaintiffs, in addition to the two school class action
settlements referred to above.  Twenty-four cases have been tried to verdict,
15 of which were won by U.S. Gypsum and 5 lost; three other cases, one won at
the trial level and two lost, were settled during appeals.  Another case that
was lost at the trial court level was reversed on appeal and remanded to the
trial court, which has now entered judgment for U.S. Gypsum.  Appeals on post-
trial motions are  pending in 4 of the tried cases. In the cases lost,
compensatory damage awards against U.S. Gypsum have totalled $11.5 million. 
Punitive damages totalling $5.5 million were entered against U.S. Gypsum in
four trials.  Two of the punitive damage awards, totalling $1.45 million, were
paid after appeals were exhausted; and two were settled during the appellate
process.

In 1992, 7 new Property Damage Cases were filed against U.S. Gypsum, 10 were
dismissed before trial, 18 were settled, 3 were closed following trial or
appeal, and 76 were pending at year-end; U.S. Gypsum expended $34.9 million
for the defense and resolution of Property Damage Cases and received insurance
payments of $10.2 million in 1992.  During 1993, 5 new Property Damage Cases
were filed against U.S. Gypsum, 7 were dismissed before trial, 11 were
settled, 1 was closed following trial or appeal, 2 were consolidated into 1,
and 61 were pending at year-end.  U.S. Gypsum expended $13.9 million for the
defense and resolution of Property Damage Cases and received insurance
payments of $7.6 million in 1993.  In 1994, 5 new Property Damage Cases were
filed against U.S. Gypsum, 5 were dismissed before trial, 19 were settled, 1
was closed following trial or appeal, and 41 were pending at year-end. U. S
Gypsum expended $40.6 million for the defense and resolution of Property
Damage Cases and received insurance payments of $9 million in 1994.  

In the Property Damage Cases litigated to date, a defendant's liability for
compensatory damages, if any, has been limited to damages associated with the
presence and quantity of asbestos-containing products manufactured by that
defendant which are identified in the buildings at issue, although plaintiffs
in some cases have argued that principles of joint and several liability
should apply.  Because of the unique factors inherent in each of the Property
Damage Cases, including the lack of reliable information as to product
identification and the amount of damages claimed against U.S. Gypsum in many
cases, including the class actions described above, management is unable to
make a reasonable estimate of the cost of disposing of pending Property Damage
Cases.


Personal Injury Cases

U.S. Gypsum was among numerous defendants in asbestos personal injury suits
and administrative claims involving approximately 54,000 claimants pending as
of March 31, 1995 although, as discussed below, approximately 22,000 of such
claims are settled but not yet closed.  All asbestos bodily injury claims
pending in the federal courts, including approximately one-third of the
Personal Injury Cases pending against U.S. Gypsum, have been consolidated in
the United States District Court for the Eastern District of Pennsylvania.

U.S. Gypsum is a member, together with 19 other former producers of asbestos-
containing products, of the Center for Claims Resolution (the "Center").  The
Center has assumed the handling, including the defense and settlement, of all
Personal Injury Cases pending against U.S. Gypsum and the other members of the
Center.  Each member of the Center is assessed a portion of the liability and
defense costs of the Center for the Personal Injury Cases handled by the
Center, according to predetermined allocation formulas.  Five of U.S. Gypsum's
insurance carriers that in 1985 signed an Agreement Concerning Asbestos-
Related Claims (the "Wellington Agreement") are supporting insurers (the
"Supporting Insurers") of the Center.  The Supporting Insurers are obligated
to provide coverage for the defense and indemnity costs of the Center's
members pursuant to the coverage provisions in the Wellington Agreement. 
Claims for punitive damages are defended but not paid by the Center; if
punitive damages are recovered, insurance coverage may be available under the
Wellington Agreement depending on the terms of particular policies and
applicable state law.  Punitive damages have not been awarded against U.S.
Gypsum in any of the Personal Injury Cases.  Virtually all of U.S. Gypsum's
personal injury liability and defense costs are paid by those of its insurance
carriers that are Supporting Insurers.  The Supporting Insurers provided
approximately $350 million of the total coverage referred to above, of which
approximately $222 million remains unexhausted as of December 31, 1994.

On January 15, 1993, U.S. Gypsum and the other members of the Center entered
into a class action settlement in the U. S. District Court for the Eastern
District of Pennsylvania. (Georgine et al. v. Amchem Products Inc., et al.,
Case No. 93-CV-0215; hereinafter "Georgine.")  The class of plaintiffs
includes all persons who have been occupationally exposed to asbestos-
containing products manufactured by the defendants, who had not filed an
asbestos personal injury suit as of the date of the filing of the class
action.  The settlement has been approved by the  district court, and if
upheld on appeal will implement for all future Personal Injury Cases, except
as noted below, an administrative compensation system to replace judicial
claims against the defendants, and will provide fair and adequate compensation
to future claimants who can demonstrate exposure to asbestos-containing
products manufactured by the defendants and the presence of an asbestos-
related disease.  Approximately 250,000 purported class members  "opted out,"
or elected to be excluded from the settlement, the district court has found
that many of such opt outs resulted from the dissemination by certain
plaintiffs' attorneys of deceptive information concerning the settlement; as a
result, the court has ordered the resolicitation of individuals who opted out
in order to determine whether they still wish to exclude themselves from the
settlements.  As of December 31, 1994, approximately 10,000 claims naming U.S.
Gypsum as a defendant had been filed by "opt outs."  In addition, in each year
a limited number of class members will have certain rights to prosecute their
claims for compensatory (but not punitive) damages in court in the event they
reject the compensation offered by the administrative processing of their
claim.

The Center members, including U.S. Gypsum, have instituted proceedings against
those of their insurance carriers that had not consented to support the
settlement, seeking a declaratory judgment that the settlement is reasonable
and, therefore, that the carriers are obligated to fund their portion of it. 
Consummation of the settlement is contingent upon, among other things, court
approval of the settlement and a favorable ruling in the declaratory judgment
proceedings against the non-consenting insurers.

Each of the defendants has committed to fund a defined portion of the
settlement, up to a stated maximum amount, over the initial ten year period of
the agreement (which is automatically extended unless terminated by the
defendants).  Taking into account the provisions of the settlement agreement
concerning the maximum number of claims that must be processed in each year
and the total amount to be made available to the claimants, the Center
estimates that U.S. Gypsum will be obligated to fund a maximum of
approximately $125 million of the class action settlement, exclusive of
expenses, with a maximum payment of less than $18 million in any single year;
of the total amount of U.S. Gypsum's obligation, all but approximately $7
million is expected to be paid by U.S. Gypsum's insurance carriers.

During 1992, approximately 20,100 Personal Injury Cases were filed against
U.S. Gypsum and approximately 10,600 were settled or dismissed.  U.S. Gypsum
incurred expenses of $21.6 million in 1992 with respect to Personal Injury
Cases of which $21.5 million was paid by insurance.  During 1993,
approximately 26,900 Personal Injury Cases were filed against U.S. Gypsum and
approximately 22,900 were settled or dismissed.  U.S. Gypsum incurred expenses
of $34.9 million in 1993 with respect to Personal Injury Cases of which $34.0
million was paid by insurance.  During 1994, approximately 14,000 Personal
Injury Cases were filed against U.S. Gypsum, U.S. Gypsum was added as a
defendant in approximately 4,000 cases  that had been previously filed, and
approximately 23,000 were settled or dismissed.  U.S. Gypsum incurred expenses
of $38 million in 1994 with respect to Personal Injury Cases of which $37.3
million was paid by insurance.  As of December 31, 1994, 1993, and 1992, 
54,000, 59,000 and 54,200 Personal Injury Cases were outstanding against U.S.
Gypsum, respectively.

U.S. Gypsum's average settlement cost for Personal Injury Cases over the past
three years has been approximately $1,600 per claim, exclusive of defense
costs.  Management anticipates that its average settlement cost may increase
due to such factors as the possible insolvency of co-defendants, although this
increase may be offset to some extent by other factors, including the
possibility for block settlements of large numbers of cases and the apparent
increase in the percentage of asbestos Personal Injury Cases that appear to
have been brought by individuals with little or no physical impairment. 
Through the Center, U.S. Gypsum had reached settlements on approximately
22,000 Personal Injury Cases pending on December 31, 1994 for amounts
totalling approximately $32 million, to be expended over a three to five  year
period.  In management's opinion, based primarily upon U.S. Gypsum's
experience in the Personal Injury Cases disposed of to date and taking into
consideration a number of uncertainties, it is probable that all asbestos-
related Personal Injury Cases pending against U.S. Gypsum as of December 31,
1994, can be disposed of for a total amount, including both indemnity costs
and legal fees and expenses, estimated to be between $90 million and $100
million (of which all but less than $5 million is expected to be paid by
insurance).  The estimated cost of resolving pending claims takes into
account, among other factors, (i) the number of pending claims; (ii) the
settlements of certain large blocks of claims for higher per-case averages
than have historically been paid; (iii) the committed but unconsummated
settlements described above; and (iv) a small increase in U.S. Gypsum's
historical settlement average.  

Assuming that the Georgine class action settlement referred to above is
approved substantially in its current form, management estimates, based on
assumptions supplied by the Center, U.S. Gypsum's maximum total exposure in
Personal Injury Cases during the next ten years (the initial term of the
agreement), including liability for pending claims and claims resolved as part
of the class action settlement, as well as defense costs and other expenses,
at approximately $250 million, of which approximately $235 million is expected
to be paid by insurance.  U.S. Gypsum's additional exposure for claims filed
by persons who have opted out of Georgine would depend on the number and
severity of such claims that are filed, which cannot presently be determined.


Coverage Action

As indicated above, all of U.S. Gypsum's carriers initially denied coverage
for the Property Damage Cases and the Personal Injury Cases, and U.S. Gypsum
initiated the Coverage Action to establish its right to such coverage.  U.S.
Gypsum has voluntarily dismissed the Supporting Insurers referred to above
from the personal injury portion of the Coverage Action because they are
committed to providing personal injury coverage in accordance with the
Wellington Agreement.  U.S. Gypsum's claims against the remaining carriers for
coverage for the Personal Injury Cases have been stayed since 1984.

In the property damage phase of the Coverage Action, the applicability of U.S.
Gypsum's insurance policies to settlements and one adverse judgment in eight
"test" Property Damage Cases has been decided.  On November 4, 1994, the
Illinois Appellate Court issued a ruling affirming in part and reversing in
part an earlier trial court ruling.  The Appellate Court ruled that the eight
"test" cases were covered under all insurance policies in effect from the date
of installation to the date of removal of asbestos-containing products (known
as the "continuous trigger" of coverage). The Court awarded reimbursement of
approximately $6.2 million spent by U.S. Gypsum to resolve the eight "test"
cases.  The defendant carriers' rehearing petition was denied by the Appellate
Court in January 1995, and on April 5, 1995 the Illinois Supreme Court denied
the insurers' petition for leave to appeal to that Court.  On April 24, 1995,
the carriers requested reconsideration of the Supreme Court's refusal to
review the Appellate Court's ruling.  Once the appellate process has
effectively concluded, further proceedings will be necessary in the trial
court to apply the appellate court's ruling to all Property Damage Cases other
that the eight "test" cases, as well as to resolve certain other remaining
issues, some of which could, if determined adversely to U.S. Gypsum, affect
the amount or accessibility of available coverage.  No schedule has yet been
established for the resolution of these issues.

The "continuous trigger" ruling, if applied to the Property Damage Cases
generally, and subject to the resolution of the remaining issues referred to
above, will allow U.S. Gypsum to access all of its available insurance
coverage for Property Damage Cases (although the same coverage must also be
used for Personal Injury Cases).  Under the continuous trigger, all Property
Damage Cases would be covered by insurance unless or until such insurance
becomes exhausted.  U.S. Gypsum is evaluating the impact of the ruling and the
remaining issues on past property damage expenditures and, if the ruling is
applied to such expenditures, U.S. Gypsum should be able to recover a
substantial portion of them, subject to the allocation of costs to insolvent
carriers, excess carriers with no defense cost obligations, and carriers that
have previously settled.  The company is not yet able to estimate the amount
of its past property damage expenditures that it could recover or when such
recoveries would occur.

Nine carriers, including two of the Supporting Insurers, have settled U.S.
Gypsum's claims for both property damage and personal injury coverage and have
been dismissed from the Coverage Action entirely.  Four of these carriers
agreed to pay all or a substantial portion of their policy limits to U.S.
Gypsum beginning in 1991 and continuing over the next four years.  Another
carrier, which provided both primary and excess policies to U.S. Gypsum during
the 1960's and 1970's, has agreed to pay U.S. Gypsum a total of $38.4 million;
$25 million was paid in April 1995 with the rest to be paid in three annual
installments.  Three other excess carriers, including the two settling
Supporting Insurers, have agreed to provide coverage for the Property Damage
Cases and the Personal Injury Cases subject to certain limitations and
conditions, when and if underlying primary and excess coverage is exhausted. 
Taking into account the above settlements, including participation of certain
of the settling carries in the Wellington Agreement, and consumption through
December 31, 1994, carriers providing a total of approximately $94 million of
unexhausted insurance have agreed, subject to the terms of the various
settlement agreements, to cover both Personal Injury Cases and Property Damage
Cases.  Carriers providing an additional $210 million of coverage that was
unexhausted as of December 31, 1994 have agreed to cover Personal Injury Cases
under the Wellington Agreement, but continue to contest coverage for Property
Damage Cases and remain defendants in the Coverage Action.  U.S. Gypsum
continues to seek negotiated resolutions with its carriers in order to
minimize the expense and delays of litigation.

Insolvency proceedings have been instituted against four of U. S. Gypsum's
insurance carriers.  Midland Insurance Company, declared insolvent in 1986,
provided excess insurance ($4 million excess of $1 million excess of $500,000
primary in each policy year) from February 15, 1975 to February 15, 1978;
Transit Casualty Company, declared insolvent in 1985, provided excess
insurance ($15 million excess of $1 million primary in each policy year) from
August 1, 1980 to December 31, 1985; Integrity Insurance Company, declared
insolvent in 1986, provided excess insurance ($10 million quota share of $25
million excess of $90 million) from August 1, 1983 to July 31, 1984; and
American Mutual Insurance Company, declared insolvent in 1989, provided the
primary layer of insurance ($500,000 per year) from February 1, 1963 to April
15, 1971.  It is possible that U.S. Gypsum will be required to pay a presently
indeterminable portion of the costs that would otherwise have been covered by
these policies.  In addition, portions of various policies issued by Lloyd's
and other London market companies between 1966 and 1979 have also become
insolvent; under the Wellington Agreement, U.S. Gypsum must pay these amounts,
which total approximately $12 million.

It is not possible to predict the number of additional lawsuits alleging
asbestos-related claims that may be filed against U.S. Gypsum.  Many Property
Damage Cases are still at an early stage and the potential liability therefrom
is consequently uncertain.  In view of the limited insurance funding currently
available for the Property Damage Cases resulting from the continued
resistance by a number of U.S. Gypsum's insurers to providing coverage, the
effect of the asbestos litigation on the Corporation will depend upon a
variety of factors, including the damages sought in the Property Damage Cases
that reach trial prior to the completion of the Coverage Action, U.S. Gypsum's
ability to successfully defend or settle such cases, and the resolution of the
Coverage Action.  As a result, management is unable to determine whether an
adverse outcome in the asbestos litigation will have a material adverse effect
on the results of operations or the consolidated financial position of the
Corporation.


Accounting Change

Effective January 1, 1994, the Corporation adopted the requirements of
Financial Accounting Standards Board Interpretation No. 39.  At that time, in
accordance with Interpretation No. 39, U.S. Gypsum recorded an accrual of $100
million for its liabilities for asbestos-related matters which are deemed
probable and can be reasonably estimated, and separately recorded an asset of
$100 million, the amount of such liabilities that is expected to be paid by
uncontested insurance.  Due to management's inability to reasonably estimate
U.S. Gypsum's liability for Property Damage Cases and (until the
implementation of Georgine is deemed probable) future Personal Injury Cases,
the liability and asset recorded in 1994 relate only to pending Personal
Injury Cases.  The implementation of Interpretation No. 39 did not impact
earnings, cash flow or net assets.


Environmental Litigation

The Corporation and certain of its subsidiaries had been notified by state and
federal environmental protection agencies of possible involvement as one of
numerous "potentially responsible parties" in a number of so-called
"Superfund" sites in the United States.  In substantially all of these sites,
the involvement of the Corporation or its Subsidiaries is expected to be
minimal.  The Corporation believes that appropriate reserves have been
established for its potential liability in connection with all Superfund sites
but is continuing to review its accruals as additional information becomes
available.  Such reserves take into account all known or estimable costs
associated with these sites including site investigations and feasibility
costs, site cleanup and remediation, legal costs, and fines and penalties, if
any.  In addition, environmental costs connected with site cleanups on USG-
owned property are also covered by reserves established in accordance with the
foregoing.  The Corporation believes that neither these matters nor any other
known governmental proceeding regarding environmental matters will have a
material adverse effect upon its earnings or consolidated financial position.

Item 6.       Exhibits and Reports on Form 8-K


(a)     (10)    Fourth Amendment, dated as of March 17, 1995, to
                Amended and Restated Credit Agreement between USG
                Corporation and USG Interiors, Inc., as borrowers; the
                Financial Institutions listed on the signature pages
                thereof, as Senior Lenders; Bankers Trust Company,
                Chemical Bank and Citibank, N.A., as Agents; and
                Citibank, N.A. as Administrative Agent.

        (15)    Letter of Arthur Andersen LLP regarding unaudited
                financial information.

        (27)    Financial Data Schedule (electronic filing only).

(b)     There were no reports on Form 8-K filed during the first quarter
        of 1995.


Exhibits (10) and (27), which have been filed as part of this Form 10-Q, are
not included herein.


                                               SIGNATURES



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



                                          USG CORPORATION


                                               
                                          By / S / Dean H. Goossen       

                                          Dean H. Goossen, Corporate Secretary,
                                          USG Corporation


May 9, 1995                               By / s / Raymond T. Belz       

                                          Raymond T. Belz, Vice President and
                                               Controller, USG Corporation