FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[x]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934  For the Fiscal Year ended November 30, 1997

                                       OR

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

                          Commission File Number 0-6953

                             LILLY INDUSTRIES, INC.
             (Exact name of Registrant as specified in its charter)

            INDIANA                                        35-0471010
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization                           Identification No.)

                              733 South West Street
                           Indianapolis, Indiana 46225
               (Address of principal executive offices) (Zip Code)

               Registrant's telephone number, including area code:
                                  317-687-6700

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                        Class A Stock, without par value
                           Common Share Purchase Right
                                (Title of class)

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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.         [X]
                                 Page 1 of Pages
                             Exhibit Index on Page


<PAGE>



The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of February 17, 1998 was $442,468,000.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of February 17, 1998.

22,702,280 shares of Class A Common Stock, without par value 
422,687 shares of Class B Common Stock, without par value


                       DOCUMENTS INCORPORATED BY REFERENCE

Part II: Items 5                      Annual Report to Shareholders for Fiscal
 through 8                            Year Ended November 30, 1997

Part III: Items 10                    Proxy Statement for Annual Meeting of
 through 13                           Shareholders to be held April 23, 1998


                                        2

<PAGE>



                                     PART I
Lilly Industries, Inc.

Item 1.  BUSINESS

Business Description

Lilly  Industries,  Inc.  (referred to herein as "Lilly" or the  "Company")  was
founded  in 1865,  and  incorporated  under the laws of the State of  Indiana on
December 5, 1888. The Company believes it is a leader in the industrial coatings
industry,  one of the five largest  industrial  coatings  manufacturers in North
America,  and one of the 15  largest  in the world  based on net sales of $601.3
million in fiscal 1997. Lilly formulates,  produces and sells coatings primarily
to original equipment  manufacturers,  enhancing the appearance of and providing
durability to products such as home and office furniture,  cabinets, appliances,
building  products,  transportation,  agricultural and  construction  equipment,
mirrors and a variety of metal and fiberglass reinforced surfaces. A significant
amount of the Company's sales represent  coatings  developed in cooperation with
its customers to meet their specific product requirements, resulting in a number
of primary supplier relationships with those customers.  Lilly also produces and
sells household products, such as fabric protectors, furniture care products and
cleaning aids.

         No one class of similar  products (other than protective and decorative
coatings)  accounted for 10% or more of consolidated  revenues of the Company in
any of the last three fiscal years. The Company has only one reportable industry
segment,  and employs  approximately  2,100  people.  The Company has plants and
sales offices in the U.S., Australia, Canada, China, Germany, Ireland, Malaysia,
Singapore, Taiwan and the United Kingdom. (1)

         On April 8, 1996, the Company  acquired all the  outstanding  shares of
Guardsman Products, Inc. ("GPI") for $235 million in cash. Like the Company, GPI
was in the business of formulating,  producing and selling industrial  coatings.
GPI also marketed various household  furniture care and automotive  after-market
products. With the acquisition of GPI, Lilly increased its fiscal 1996 net sales
by   approximately   55%  over  fiscal  1995  net  sales.  The  GPI  acquisition
strengthened  Lilly's  market  position by broadening  customer base and product
lines. The acquisition  increased  Lilly's presence in industrial wood and metal
coatings,  and provided it with important  environmentally-friendly  water-borne
technologies.  Lilly also gained a household products business focused on fabric
and  stain  protection  products  for  household  furniture.  This  business  is
characterized  by  relatively  high  margins and the  potential  for new product
development, and adds a degree of diversification to the Company.

--------------

(1)  References in this Form 10-K are  references to the Company's  fiscal years
ended November 30, 1995, 1996 and 1997.


<PAGE>

Industrial Coatings Industry

         Coatings protect a wide range of manufactured goods from the effects of
external  elements  over the life of the  product.  In addition,  coatings  make
products more  aesthetically  pleasing to end-use  customers.  Lilly competes in
three  principal  industrial  coatings  markets:  (i)  wood  coatings,  such  as
furniture lacquer and protective  color;  (ii) metal coatings,  such as coil and
powder  coatings  used  to  finish  furniture,   appliances  and  transportation
equipment;  and (iii)  composites  and glass  coatings,  such as those  used for
mirrors.

         Sales for the global paints and coatings market equal approximately $50
billion   annually,   with  annual  sales  for  the  domestic   market  equaling
approximately $17 billion.  Annual sales for the industrial  coatings segment in
which Lilly participates are approximately $25 billion globally and $8.5 billion
domestically.  The balance of the market  consists  primarily  of  architectural
coatings (primarily house paints), a market in which Lilly does not compete, and
specialty coatings, including maintenance coatings and traffic paints.

         Industrial  coatings is a mature and highly fragmented  industry in the
U.S.,  growing  in-line with  industrial  production,  and  includes  many small
competitors.  Long  term  annual  unit  growth in the U.S.  industrial  coatings
business is projected between 1% and 2%, largely tied to fluctuations in general
economic  cycles.  Annual  unit growth  rate is  projected  between 1% and 2% in
Europe and between 4% and 6% in Asia.  The North  American  industrial  coatings
industry is divided among over 700 participants.

         Due to its maturity and historically  fragmented  participant base, the
coatings industry is undergoing  consolidation through mergers and acquisitions.
Consolidation  of the  coatings  industry  is being  driven by several  factors,
including (i) the need for growth in maturing markets;  (ii) environmental costs
which,  together  with a more  demanding  global  customer  base,  will  make it
difficult for smaller  manufacturers with limited financial  resources to remain
independent;  and (iii) the increasing  technical and financial resources of the
larger players. To date, the effects of industry consolidation include a greater
concentration of market share with fewer companies, a reduction in the number of
competitors,  and the  creation  of new  synergies  within the  larger  coatings
companies,  such as raw material purchasing power and manufacturing economies of
scale.

Competition

         The industrial  coatings  industry is  competitive,  with more than 700
North   American   manufacturers   operating   in  numerous   market   segments.
Manufacturers  include large  international  companies as well as small regional
firms,  and  no  one  manufacturer  dominates.  Competitive  advantages  include
developing coatings that meet specific customer  requirements,  pricing coatings
competitively   and   rapidly   delivering   quality   products.   Increasingly,
technological  developments  that  reduce  negative  environmental  effects  are
becoming an important competitive factor.

         Lilly is one of the top five industrial coatings manufacturers in North
America,  one of the top 15 worldwide,  and, with the acquisition of GPI, became
the largest supplier to the U.S. residential furniture market, serving virtually
all of the  top 25 U.S.  furniture  manufacturers.  The  Company  is  also  well
represented in other wood coatings,  industrial metal finishes,  coil and powder
coatings and mirror glass  coatings  markets.  While Lilly is among the top five
North American producers of industrial coatings,  some competitors are generally
more diversified and have greater  financial  resources than the Company.  Major
competitors include Akzo Nobel; Ferro Corporation;  Morton International,  Inc.;
The Sherwin-Williams Company; PPG Industries, Inc.; and The Valspar Corporation.

End Use Markets

         The  Company  focuses on four end use  markets:  metal  coatings;  wood
coatings;  glass coatings and  composites;  and Guardsman  products.  These four
markets  accounted  for  approximately  39%,  38%, 12% and 11% of the  Company's
fiscal 1997 net sales,  respectively.  The following provides a summary of these
markets.


<PAGE>

         Metal  Coatings.  The  Company's  metal  coatings  provide  specialized
coatings for numerous  applications  such as appliances,  building  products and
fixtures (such as residential  siding,  aluminum  gutters,  and metal  roofing),
agricultural and construction equipment,  furniture, bicycles, digital satellite
systems,  automotive trim and wheels, entry and garage doors, computers,  window
trim,  shelving,  and playground  equipment.  These coatings include traditional
liquid  coatings as well as  polyester-based  coil  coatings and a full range of
decorative  and  functional  powder  coatings.  The  coil  coatings  process  is
considered one of the most  environmentally  safe,  energy-efficient  methods of
applying coatings to metal substrates. Lilly's technical innovation has produced
conventional  and waterborne coil coatings  formulated with  proprietary  resins
that provide high exterior  durability,  flexibility,  corrosion  resistance and
chemical  resistance.  Powder coatings are experiencing  growth because of their
environmental  desirability,  as powder coatings have no solvent content.  Lilly
powder coatings are environmentally compliant and provide outstanding durability
and performance for both interior and exterior applications.  Metal coatings are
manufactured at fourteen facilities in the U.S. and two in Canada.

         Wood  Coatings.   Lilly's  wood  coatings   provide  a  full  range  of
custom-formulated  coatings  designed  to  enhance  the  beauty  of  wood  while
providing  maximum  durability  for  products  such as  residential  and  office
furniture,   building   products  and  kitchen   cabinets.   Wood  coatings  are
manufactured at six U.S.  locations,  as well as five foreign facilities located
in Canada, China, Ireland, Malaysia and Taiwan.

         Glass  Coatings  and  Composites.   Lilly's  glass  coatings  are  well
recognized  globally.  The Company's glass coatings provide mirror manufacturers
with everything  needed to convert glass into mirrors of premier quality.  Glass
coatings  include  patented  silver and  copper  plating  solutions,  as well as
low-lead and lead-free  coatings for mirror-back  protection,  all of which meet
the environmental  and quality  performance  standards of mirror  manufacturers.
Glass coatings are  manufactured at two facilities  located in Connecticut,  and
foreign  facilities  located in Canada and  Germany.  The  Company's  composites
include  in-mold  coatings  ("gelcoats")  that are used as the surface finish on
boats, recreational vehicles,  cultured marble vanity tops, custom van and truck
components and personal watercraft.

         Guardsman  Products.  The Company also  manufactures  and distributes a
wide variety of  household  products  consisting  of four  distinct  businesses:
Interior  Care,  Consumer  Products,  Specialty  Chemicals and  WoodPro(R).  The
Interior Care business provides fabric protection and furniture care products to
consumers  through  furniture  stores,  and is the world's  largest  supplier of
retail-applied fabric protection, Fabri-Coate(R). The Consumer Products business
markets  several  well-known  brand  name  household  specialty  items,  such as
Guardsman(R) Furniture Polish, Goof Off(R) remover, One-Wipe(R) dust clothes and
Chip Clip(R) snack  closures.  These  products are sold through  hardware,  home
center,  paint,  mass merchant and grocery  retailers.  The Specialty  Chemicals
business  manufactures  private-label  automotive  chemicals  such as brake part
cleaner,  fuel  injector  cleaner,  and  engine  oil  supplements  for  national
automotive customers. This division also serves as a private-label contractor in
the chemical packaging market. The WoodPro(R) business is a franchise group that
offers on-site repair and  maintenance of wood and  upholstered  furnishings for
the home or office.  These  businesses  operate from two  facilities  located in
Michigan and one facility located in the United Kingdom.

Distribution and Customers

         Lilly's  technical sales force of  approximately  600 people market and
sell  its  industrial  coatings  directly  to over  6,000  industrial  customers
throughout the world. Most of the Company's customers are located throughout the
United States and Canada, with the remaining customers  concentrated in Asia and
Europe.  The Company is not dependent upon any single customer or few customers.
The loss of any single customer would not have a material  adverse impact on the
Company.  No single  customer  of the  Company  represented  more than 5% of net
sales. International sales, including U.S. exports of $17.2 million, were $126.5
million in fiscal  year  1997,  which  represented  21% of  consolidated  sales.
Information  concerning  the Company's net sales,  pre-tax  profit and assets in
foreign  countries and the United States for the three years ended  November 30,
1997 is set forth in Note 9 in the Notes to Consolidated Financial Statements in
the Company's 1997 Annual Report to Shareholders.  Note 9 is incorporated herein
by reference.


<PAGE>

         The Company has no significant  order backlog.  No material part of the
business is subject to  re-negotiation  of profit or termination of contracts or
subcontracts  at the election of any  governments.  Historically,  first quarter
operating results are below operating  results for the second,  third and fourth
quarters  due to the lower  demand for  industrial  production  which  typically
occurs in December.

Raw Materials

     Raw  materials  are the  largest  single  cost in the  industrial  coatings
business,  representing  about half of the selling price of most  coatings.  The
typical  coating  consists  of  pigments  dispersed  in a  liquid  known  as the
"vehicle," which is usually composed of one or more polymers, and a solvent. The
solvent helps the coating spread over the substrate; the polymers form a film to
hold the  coating in place after the solvent has  evaporated  and  provides  the
unique  performance  characteristics  of the  coating.  Solvents  are  typically
petrochemical-based  products  that  evaporate  quickly.  However,  the  use  of
petrochemical-based   solvents  is   declining   as   environmentally   friendly
technologies,  such as water-borne and powder  coatings,  gain market share. The
pigment,  usually an  inorganic  substance,  provides the color.  "Fillers"  and
"extender  pigments" provide gloss and sheen control,  while specialty chemicals
known as additives, enhance the flow and application properties of the coating.

         The Company  manufactures  its  industrial  coatings  from a variety of
polymers, pigments, solvents and other chemicals, the bulk of which are obtained
from petrochemical feed stocks. In addition to petrochemicals,  the Company uses
both silver and copper. Under normal conditions,  all of these raw materials are
available on the open market,  although prices and  availability  are subject to
fluctuation from time to time.  Lilly, like most other companies in the coatings
industry,  uses a variety of organic and inorganic materials in its products. No
single raw material  cost  currently  accounts for over 4% of net sales and most
account for 1% of net sales or less.

         The Company's  largest single raw material cost is for titanium dioxide
(TiO2),  which is a white pigment, and accounts for approximately 30% of pigment
usage in the coatings industry. The Company's annual expenditures for TiO2 total
approximately 4% of the Company's annual net sales.

Research and Development

         Lilly's  Corporate  Technology  Center,  as well as laboratories at its
major facilities, emphasize the development of product finishes to meet specific
requirements  of  customers  and  the  maintenance  of  quality  throughout  the
manufacturing  process.  They are  also  engaged  in  research  directed  toward
development of new products and new  manufacturing  and application  techniques.
Research and development  expenses were $18.7 million (3.1% of net sales), $17.3
million (3.4% of net sales) and $13.2 million (4.0% of net sales) for the fiscal
years  1997,  1996 and  1995,  respectively.  Future  research  and  development
expenses as a percent of net sales are  anticipated  to remain at current levels
with emphasis on new product development.

         The Company holds several patents and trademarks,  and considers patent
and trademark protection to be important,  but no individual patent is currently
material  to the  Company's  business  as a whole.  The  Company has patents and
licenses for glass  coatings which are material to that specific  business;  and
new patents are continually being developed to sustain the Company's competitive
advantage.

Properties

         As of November 30, 1997, Lilly maintained 31 principal  facilities,  of
which 20 were located in the U.S. See Item 2 -  Properties.  The plants range in
size from approximately  260,000 square feet to approximately 9,000 square feet.
The  facilities  vary in age and are well  maintained  and  adequate  for  their
present uses.  Utilization  rates vary from site to site  depending on capacity,
customers served and range of production  capabilities.  The Company believes it
can take advantage of special  situations (e.g.,  special orders, new customers,
new technology) that may arise during the course of an operating cycle by adding
capacity through  incremental  shifts.  Each facility operates technical support
centers to assist  customers  in  addressing  both  application  and  processing
issues.


<PAGE>

         Although the Company has traditionally located its domestic plants near
its  customer  base,  the Company has begun to rely on larger,  more  efficient,
centralized  plants in the U.S.  With  respect to its  foreign  operations,  the
Company  continues  to adhere to its strategy of  following,  and being in close
proximity to, its customers as they open plants around the world.

Employees and Collective Bargaining Units

         As of November 30, 1997, Lilly employed approximately 2,100 people. The
coatings  industry  is not  heavily  unionized  and to the extent  that there is
unionization,   it  is  highly   fragmented.   Unionized   workers  account  for
approximately  14% of the  Company's  total work force and  operate  through six
separate  unions  at seven  Lilly  facilities.  The  Company  believes  that its
relations with its employees are good.

Environmental Regulation

         The  Company's  operations  are subject to numerous  foreign,  federal,
state and local environmental laws and regulations relating to protection of the
environment,  employee health and safety, and the discharge,  storage, treatment
and disposal of hazardous  materials.  In the United States,  these laws include
the  Comprehensive  Environmental  Response,   Compensation  and  Liability  Act
("CERCLA" or "Superfund"), the Resource Conservation and Recovery Act, the Clean
Water  Act,  and the  Clean  Air Act.  Certain  operations  of the  Company  use
pigments,  resins  and  solvents  that  contain  chemicals  that are  considered
hazardous under various  environmental  laws.  Accordingly,  management  closely
monitors the Company's environmental  performance at its facilities.  Management
believes  that the  Company  is in  compliance  in  material  respects  with all
environmental laws and regulations.

         CERCLA imposes joint and several liability,  without regard to fault or
the legality of the  original  conduct,  on certain  classes of persons that are
considered to have  contributed to the release of hazardous  substances into the
environment.  These persons include the owner and operator of the site where the
release  occurred and  companies  that  disposed or arranged for disposal of the
hazardous  substances  found  at the  site.  The  Company  has  been  named as a
potentially  responsible  party  ("PRP")  by  the  United  States  Environmental
Protection  Agency  ("EPA") or similar  state  agencies  with respect to several
inactive waste  processing  and/or disposal sites where clean-up costs have been
incurred  or may be  incurred.  In  addition  to these  sites,  the  Company  is
currently investigating and remediating on-site disposal areas at certain of its
current and former facilities.

      The Company continually assesses its environmental matters and establishes
reserves to provide for these matters as they arise. The Company's experience to
date  leads  it to  believe  that  it  will  have  continuing  expenditures  for
compliance  with  provisions   regulating  protection  of  the  environment  and
remediation  efforts  at waste  and  manufacturing  sites.  However,  management
believes  that such  expenditures  will not have a  material  adverse  effect on
operating results or the financial position of the Company as a whole.

         Under  the  Clean  Air  Act  Amendments  of 1990  ("CAAA"),  the EPA is
required to regulate  volatile organic compound ("VOC") emissions from a variety
of consumer and commercial products,  including coatings.  Accordingly,  in June
1996, the EPA issued proposed  regulations that would limit VOCs from industrial
coatings.  Final  regulations are expected in 1998.  Although the Company cannot
accurately assess the impact of these regulations prior to their promulgation or
implementation  in final form,  based on currently  available  information,  the
Company believes that these  regulations will not have a material adverse effect
on the operating results or the financial position of the Company as a whole.

FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-K contains  statements  which  constitute
forward looking  statements  within the meaning of Section 27A of the Securities
Act.  Discussions  containing such forward looking statements may be found under
the captions "Management's  Discussion and Analysis of Results of Operations and
Financial Condition  ("MD&A"),  and "Business," as well as elsewhere within this
Report.  Forward looking  statements  include  statements  regarding the intent,
belief or current  expectations  of the Company,  primarily  with respect to the
future operating  performance of the Company or related  industry  developments.
When used in this Report,  terms such as  "anticipate,"  "believe,"  "estimate,"
"expect,"  "intend,"  "indicate," "may be," "objective,"  "plan," "predict," and
"will be" are intended to identify such statements.  Forward looking  statements
are not guarantees of future  performance  and involve risks and  uncertainties.
Forward looking statements are based upon management's  expectations at the time
they are made.  Actual results could differ  materially  from those projected in
the forward  looking  statements as a result of the risk factors set forth below
and the matters set forth in this Report generally, many of which are beyond the
control of the  Company.  The Company  cautions  the reader,  however,  that the
following list of factors may not be exhaustive.


<PAGE>

Sensitivity to General Economic and Industry Conditions

         The  Company's  business,  and the  industrial  coatings  industry as a
whole,  is cyclical in nature and affected by the general trends of the economy.
In  particular,   consumer  behavior  and  confidence,  the  level  of  personal
discretionary spending,  housing activity,  interest rates, credit availability,
and demographics  influence the Company's end use markets,  such as the housing,
building products, construction and agricultural equipment, appliance, furniture
and automotive industries.  During economic downturns,  these industries tend to
experience declines, which in turn diminish demand for the Company's products.

Effects of Leverage

         The Company's level of indebtedness will have several important effects
on its operations including (i) a substantial portion of the Company's cash flow
from  operations  will  be  dedicated  to debt  service  obligations,  (ii)  the
covenants  contained in the Company's revolving credit facility and senior notes
may limit  the  Company's  ability  to borrow  additional  funds,  and (iii) the
Company's  leveraged  financial position may make the Company more vulnerable to
economic downturns and may limit its ability to withstand competitive pressures,
and plan for, or react to, changes in market conditions.

Environmental Matters

         The  operations  of the Company,  like those of other  companies in the
industrial coatings industry,  are subject to numerous foreign,  federal,  state
and local environmental laws and regulations. While the Company believes that it
is currently in material compliance with environmental requirements, any failure
to comply with such present and future requirements could subject the Company to
future liabilities. The imposition of more stringent environmental requirements,
or a  determination  that  the  Company  is  potentially  responsible  for  site
remediation  where   contamination  is  not  presently  known  could  result  in
expenditures for which no accrual has been made.

Mature Industry

         The  industrial  coatings  industry  is a mature  business in the U.S.,
growing in line with industrial production.  Long-term annual growth in the U.S.
industrial  coatings  industry is projected in the 1% to 2% range. To expand and
remain  competitive,  the Company  will be  required to continue  (i) to develop
coatings that meet specific customer requirements,  (ii) to price those coatings
competitively,  and (iii) to deliver quality products on time. In addition,  the
Company will also need to keep pace with  technological  developments  to remain
competitive,    particularly   technological   developments   that   relate   to
environmental  demands such as reductions of volatile organic compound emissions
imposed by the Clean Air Act Amendments of 1990.

Raw Materials

         Over 50% of the Company's operating costs are typically attributable to
the cost of raw materials.  The cost of these raw  materials,  most of which are
derived from  petrochemical  products,  depends on numerous  factors,  including
changes in the economy,  the level of foreign and domestic  production,  and the
crude oil supply and demand balance.  A rise in the price of raw materials could
materially  increase the Company's  operating costs and thereby adversely affect
its profit margins.


International Operations

         During fiscal 1997, the Company's  international sales,  including U.S.
exports of $17.2 million,  accounted for  approximately  21% of total sales, and
the Company may increase  this  percentage  in the coming  years.  The Company's
international  operations  subject  it to the  risks of doing  business  abroad,
including  currency  fluctuations,  various trade barriers,  restrictions on the
transfer of funds, greater difficulty in accounts receivable collection, burdens
of complying  with a wide variety of foreign laws,  and, in certain parts of the
world, economic,  social, and political instability,  any of which could have an
adverse effect on the Company's financial position and results of operations.
<PAGE>
                        Executive Officers of the Company

     The executive  officers of the Company,  the age of each, the positions and
offices  held by each during the last five years,  and the period  during  which
each has served in such positions and offices are as follows:

     Name of
Executive Officer            Age               Positions and Offices Held
-----------------            ---               --------------------------
Larry H. Dalton              50                Vice President - Manufacturing
                                               and Engineering since July,
                                               1994; General Manager of the
                                               Company's Indianapolis Division
                                               from  prior to 1992 to
                                               July, 1994.

William C. Dorris            54                Director since 1989; Vice
                                               President - Corporate
                                               Development since July, 1994;
                                               General Manager of the
                                               Company's High Point Division
                                               from prior to 1992 to July,
                                               1994; of the Company's
                                               Templeton Division from prior
                                               to 1992 to July, 1994; and of
                                               the Company's Dallas Division
                                               from 1993 to July, 1994.

John C. Elbin                44                Vice  President,  Chief Financial
                                               Officer and Secretary since  
                                               April, 1997; Senior  Vice 
                                               President  and Chief Financial 
                                               Officer, Pet Incorporated from 
                                               prior to 1992 to June, 1995.

Douglas W. Huemme            56                Director since 1990; Chairman,
                                               President and Chief Executive
                                               Officer of the Company since
                                               prior to 1992.

A. Barry Melnkovic           40                Vice President - Human
                                               Resources since April, 1996;
                                               Director, Corporate Employee &
                                               Labor Relations and Director
                                               Corporate Compensation and
                                               Benefits, Cummins Engine
                                               Company, Inc., from August, 1993
                                               to February, 1996; Division Human
                                               Resource Manager, Ashland
                                               Chemical, Inc. from prior to
                                               1992 to August,  1993.

Kenneth L. Mills             49                Assistant Secretary since prior
                                               to 1992; Treasurer from prior
                                               to 1992 until October, 1993;
                                               Corporate Accounting Director
                                               since October, 1993.

Robert A. Taylor             43                Director  since  April,  1997;
                                               Executive   Vice   President  and
                                               Chief  Operating   Officer  since
                                               February,  1997;  Vice  President
                                               and   General    Manager,    Wood
                                               Coatings   from   April  1994  to
                                               February,  1997;  Vice President,
                                               Specialty and Container Coatings,
                                               AKZ0 Coatings, Inc. from 1992 to 
                                               April, 1994.

     Each executive officer will serve as such until his successor is chosen and
qualified. No family relationships exist among the Company's executive officers.


                                                         6

<PAGE>



Item 2.  Properties.

     The Company has 31 principal  facilities.  The  locations  and  approximate
square footage at those facilities are as follows:

     Location                                                        Square Feet

     High Point, North Carolina (2 locations)                          320,000
     Indianapolis, Indiana                                             260,000
     Grand Rapids, Michigan                                            165,000
     Eschweiler, Germany                                               121,000
     Fremont, Michigan                                                 120,000
     North Kansas City, Missouri                                       106,000
     London, Ontario, Canada                                           103,000
     Bowling Green, Kentucky                                            94,000
     Moline, Illinois                                                   76,000
     Cornwall, Ontario, Canada                                          71,000
     Kaohsiung Hsien, Taiwan, R.O.C.                                    64,000
     Montebello, California                                             58,000
     Charlotte, North Carolina                                          57,000
     Rocky Hill, Connecticut                                            57,000
     Gardena, California                                                52,000
     Paulsboro, New Jersey                                              47,000
     Dothan, Alabama                                                    42,000
     Dallas, Texas                                                      36,000
     Little Rock, Arkansas                                              35,000
     Seattle, Washington                                                30,000
     Elkhart, Indiana                                                   25,000
     Guangdon, China                                                    25,000
     Selangor, Malaysia                                                 20,000
     Davie, Florida                                                     14,000
     Woodbridge, Connecticut                                            13,000
     Ballinamore, Ireland                                               12,000
     Oxfordshire, England                                               12,000
     Wallenfels, West Germany                                            9,000
     North Sydney, Australia                                             1,000
     Singapore                                                           1,000

All of these principal  facilities  noted above are owned directly or indirectly
by the Company,  except for the facilities in Grand Rapids,  Michigan,  Gardena,
California, Guangdon, China, Selangor, Malaysia, Oxfordshire, England, Singapore
and Australia which are leased. 

Item 3.  Legal Proceedings.

     The  Company is  involved  in various  litigation  and other  asserted  and
unasserted claims arising in the ordinary course of business, primarily relating
to  product  warranty  and  clean-up  costs  at  independently   operated  waste
treatment/disposal  sites  previously used by the Company or the predecessors of
businesses  purchased  by the  Company.  While the  results of lawsuits or other
proceedings  against the Company cannot be predicted with certainty,  management
believes  that  uninsured  and  unreserved  losses,  if any,  arising from these
proceedings  will  not  have  a  material  adverse  effect  on the  business  or
consolidated financial position of the Company.



                                        8

<PAGE>

Item 4.  Submission of Matters to a Vote of Security Holders.

     No matter was submitted  during the fourth quarter of fiscal 1997 to a vote
of security holders through the solicitation of proxies or otherwise.


                                     PART II

Item 5.       Market for Company's Common Equity and Related
              Stockholder Matters.

     The information  required by this item is incorporated by reference  herein
from  the  information  included  under  caption  "Stock  Trading  and  Dividend
Information" in the Company's 1997 Annual Report to Shareholders and is included
in Exhibit 13. There is no  established  public trading market for the Company's
Class B Common Stock.

Item 6.       Selected Financial Data.

     The information  required by this item is incorporated by reference  herein
from the information included under the caption "Selected Financial Data" in the
Company's 1997 Annual Report to Shareholders and is included in Exhibit 13.

Item 7.       Management's Discussion and Analysis of Results of
              Operations and Financial Condition.

     The information  required by this item is incorporated by reference  herein
from the  information  included under the caption  "Management's  Discussion and
Analysis of Results of Operations and Financial Condition" in the Company's 1997
Annual Report to Shareholders and is included in Exhibit 13.

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk.

     No information  is required to be disclosed  under this item of this report
pursuant to General Instruction 1 to Item 305 of Regulation S-K.

Item 8.       Financial Statements and Supplementary Data.

     The  consolidated  financial  statements of the Company are incorporated by
reference from the Company's 1997 Annual Report to Shareholders and are included
in Exhibit 13.

Item 9.       Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure.

     No information  is required to be disclosed  under this item of this report
pursuant to Instruction 1 to Item 304 of Regulation S-K.




                                        9

<PAGE>



                                    PART III

Item 10.              Directors and Executive Officers of the Company.

     The  information  required by this item with  respect to  directors  of the
Company is incorporated  herein by reference from the section entitled "Proposal
Number One,  Election of Directors" of the Company's  definitive Proxy Statement
relating to its Annual  Meeting of  Shareholders  to be held April 23, 1998. See
Part  I,  for a list  of the  Company's  executive  officers,  and  their  ages,
positions and offices.

Item 11.              Executive Compensation.

     The information  required by this item is incorporated  herein by reference
from the section entitled  "Compensation of Executive Officers" of the Company's
definitive Proxy Statement  relating to its Annual Meeting of Shareholders to be
held April 23, 1998.

Item 12.              Security Ownership of Certain Beneficial Owners and
                      Management.

     The information  required by this item is incorporated  herein by reference
from the sections  entitled "Share Ownership of Certain  Beneficial  Owners" and
"Proposal Number One,  Election of Directors" of the Company's  definitive Proxy
Statement  relating to its Annual Meeting of  Shareholders  to be held April 23,
1998.

Item 13.              Certain Relationships and Related Transactions.

     The information  required by this item, if any, is  incorporated  herein by
reference from the section entitled "Proposal Number One, Election of Directors"
of the Company's  definitive  Proxy statement  relating to its Annual Meeting of
Shareholders to be held April 23, 1998.




                                       10

<PAGE>



                                     PART IV

Item 14.              Exhibits, Financial Statement Schedules, and Reports on
                      Form 8-K.

(a)-1     The following items,  included in the Company's 1997 Annual Report
          to  Shareholders,  are  incorporated  herein by reference  and are
          included herein in Exhibit 13.

          Report of Independent Auditors

          Consolidated Balance Sheets --
          November 30, 1997 and 1996

          Consolidated Statements of Income and Retained Earnings -- Years ended
          November 30, 1997, 1996 and 1995

          Consolidated Statements of Cash
          Flows -- Years ended November 30, 1997,
          1996 and 1995

          Notes to Consolidated Financial
          Statements -- November 30, 1997


(a)-2     The following financial statement schedule is filed as a
          part of this report.


Schedule

          Valuation and Qualifying Accounts


All other  schedules for which  provision is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.



                                       11

<PAGE>



(a)-3         Exhibits.

     Exhibits Incorporated by Reference


                                  EXHIBIT INDEX

Exhibit No.                 Description                                     Page

2        Merger  Agreement,  dated  March 4,  1996,  by and among  Lilly
         Industries,  Inc.,  LP  Acquisition  Corporation  and Guardsman
         Products,  Inc.  This exhibit is  incorporated  by reference to
         Exhibit  2 to Lilly  Industries,  Inc.'s  Form 8-K  Current
         Report filed with the SEC on April 22, 1996.

3.1      Restated Articles of Incorporation of Lilly  Industries,  Inc.,
         as  amended.  This  exhibit is  incorporated  by  reference  to
         Exhibit  3(a) to Lilly  Industries,  Inc.'s  Form  10-K  Annual
         Report for the fiscal year ended November 30, 1996.

3.2      Restated By-Laws of Lilly  Industries,  Inc., as amended.  This
         exhibit is  incorporated  by reference to Exhibit 3(b) to Lilly
         Industries,  Inc.'s Form 10-K Annual Report for the fiscal year
         ended November 30, 1993.

4.1      Indenture,  dated November 10, 1997,  between Lilly Industries,
         Inc.  and  Harris  Trust and  Savings  Bank.  This  exhibit  is
         incorporated  by reference to Exhibit 4.1 to Lilly  Industries,
         Inc.'s  Registration  Statement  on Form  S-4  filed  with  the
         Commission on December 5, 1997 (Commission No. 333-41587).

4.2      Credit  Agreement,   dated  October  24,  1997,  between  Lilly
         Industries,  Inc., the Lenders Signatory thereto, and NBD Bank,
         N.A. as Agent.  This  exhibit is  incorporated  by reference to
         Exhibit 4.2 to Lilly Industries,  Inc.'s Registration Statement
         on Form S-4  filed  with the  Commission  on  December  5, 1997
         (Commission No. 333-41587).

4.3      Rights  Agreement,   dated  January  12,  1996,  between  Lilly
         Industries,  Inc.  and KeyCorp  Shareholder  Services,  Inc. as
         Rights  Agent.  This  exhibit is  incorporated  by reference to
         Exhibit 4 to Lilly  Industries,  Inc.'s Form 8-A filed with the
         SEC on January 23, 1996.

10.1     Registration  Agreement,  dated November 5, 1997, between Lilly
         Industries,  Inc. and Salomon Brothers,  Inc., Lehman Brothers,
         Inc. and Schroder & Co., Inc. This exhibit is  incorporated  by
         reference   to  Exhibit  10.1  to  Lilly   Industries,   Inc.'s
         Registration Statement on Form S-4 filed with the Commission on
         December 5, 1997 (Commission No. 333-41587).

10.2     Form of Exchange  Agent  Agreement,  dated  December  22, 1997,
         between  Lilly  Industries,  Inc.  and Harris Trust and Savings
         Bank. This exhibit is incorporated by reference to Exhibit 10.2
         to Lilly Industries,  Inc.'s Registration Statement on Form S-4
         filed with the Commission on December 5, 1997  (Commission  No.
         333-41587).

*10.3    Lilly Industries,  Inc. Unfunded  Supplemental  Retirement Plan
         (as in effect November 29, 1990).  This exhibit is incorporated
         by reference to Exhibit 10(b) to Lilly Industries,  Inc.'s Form
         10-K Annual Report for the fiscal year ended November 30, 1990.

*10.4    Lilly  Industries,  Inc.  Unfunded  Excess  Benefit Plan.  This
         exhibit is  incorporated by reference to Exhibit 10(c) to Lilly
         Industries,  Inc.'s Form 10-K Annual Report for the fiscal year
         ended November 30, 1989.

*10.5    Lilly Industries,  Inc. Second Unfunded Supplemental Retirement
         Plan (effective June 4, 1990).  This exhibit is incorporated by
         reference  to Exhibit  10(f) to Lilly  Industries,  Inc.'s Form
         10-K Annual Report for the fiscal year ended November 30, 1990.

*10.7    Lilly  Industries,  Inc. 1991 Director Stock Option Plan.  This
         exhibit is  incorporated by reference to Exhibit 10(i) to Lilly
         Industries,  Inc.'s Form 10-K Annual Report for the fiscal year
         ended November 30, 1991.


<PAGE>

*10.8    Lilly Industries,  Inc. 1992 Stock Option Plan. This exhibit is
         incorporated by reference to Exhibit 10(j) to Lilly Industries,
         Inc.'s  Form 10-K  Annual  Report  for the  fiscal  year  ended
         November 30, 1991.  First Amendment to Lilly  Industries,  Inc.
         1992  Stock  Option  Plan.  This  exhibit  is  incorporated  by
         reference   to  Exhibit  10.8  to  Lilly   Industries,   Inc.'s
         Registration Statement on Form S-4 filed with the Commission on
         December 5, 1997 (Commission No. 333-41587).

10.9     First  Amendment  to Credit  Agreement,  dated  April 2,  1997,
         between Lilly Industries,  Inc., the Lenders Signatory thereto,
         NBD Bank,  N.A.,  as Agent,  and Harris Trust and Savings Bank,
         Comerica  Bank,  Mercantile  Bank of St.  Louis  and Bank  One,
         Indianapolis,  N.A., as Co-Agents. This exhibit is incorporated
         by  reference  to Exhibit 10 to Lilly  Industries,  Inc.'s Form
         10-Q  Quarterly  Report  for the fiscal  quarter  ended May 31,
         1997.

*10.10   Lilly Industries,  Inc. Executive Retirement Plan (effective as
         of January 1, 1996).  This exhibit is incorporated by reference
         to Exhibit 10(i) to Lilly  Industries,  Inc.'s Form 10-K Annual
         Report for the fiscal year ended November 30, 1996.

*10.11   Lilly Industries, Inc. Retirement Plan (effective as of January
         1,  1996)  and  Trust  Agreement  for  Lilly  Industries,  Inc.
         Replacement  Plan between  Lilly  Industries,  Inc. and Bankers
         Trust Company of Des Moines,  dated  September  27, 1996.  This
         exhibit is  incorporated by reference to Exhibit 10(j) to Lilly
         Industries,  Inc.'s Form 10-K Annual Report for the fiscal year
         ended November 30, 1996.

*10.12   Change in Control  Agreement,  dated September 26, 1997, by and
         between   Registrant  and  Hugh  M.  Cates.   This  exhibit  is
         incorporated by reference to Exhibit 10(1) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.

*10.13   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and  Larry  H.  Dalton.  This  exhibit  is
         incorporated by reference to Exhibit 10(2) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.

*10.14   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and  William C.  Dorris.  This  exhibit is
         incorporated by reference to Exhibit 10(3) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.

*10.15   Change in Control  Agreement,  dated September 26, 1997, by and
         between   Registrant  and  John  C.  Elbin.   This  exhibit  is
         incorporated by reference to Exhibit 10(4) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.

*10.16   Change in Control  Agreement,  dated September 26, 1997, by and
         between Registrant and Ned L. Fox. This exhibit is incorporated
         by reference to Exhibit 10(5) to Lilly Industries,  Inc.'s Form
         10-Q  Quarterly  Report for the fiscal quarter ended August 31,
         1997.

*10.17   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and  Douglas W.  Huemme.  This  exhibit is
         incorporated by reference to Exhibit 10(6) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.


<PAGE>

*10.18   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and A. Barry  Melnkovic.  This  exhibit is
         incorporated by reference to Exhibit 10(7) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.

*10.19   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and John  D.  Million.   This  exhibit  is
         incorporated by reference to Exhibit 10(8) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.

*10.20   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and  Kenneth  L.  Mills.  This  exhibit is
         incorporated by reference to Exhibit 10(9) to Lilly Industries,
         Inc.'s Form 10-Q Quarterly  Report for the fiscal quarter ended
         August 31, 1997.

*10.21   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and Gary D.  Missildine.  This  exhibit is
         incorporated   by   reference   to  Exhibit   10(10)  to  Lilly
         Industries,  Inc.'s Form 10-Q  Quarterly  Report for the fiscal
         quarter ended August 31, 1997.

*10.22   Change in Control  Agreement,  dated  September 5, 1997, by and
         between  Registrant  and  Robert A.  Taylor.  This  exhibit  is
         incorporated   by   reference   to  Exhibit   10(11)  to  Lilly
         Industries,  Inc.'s Form 10-Q  Quarterly  Report for the fiscal
         quarter ended August 31, 1997.

*10.23   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant and Keith C. Vander Hyde, Jr.. This exhibit
         is  incorporated  by  reference  to  Exhibit  10(12)  to  Lilly
         Industries,  Inc.'s Form 10-Q  Quarterly  Report for the fiscal
         quarter ended August 31, 1997.

*10.24   Change in Control  Agreement,  dated September 26, 1997, by and
         between  Registrant  and  Jay  M.  Wiegner.   This  exhibit  is
         incorporated   by   reference   to  Exhibit   10(13)  to  Lilly
         Industries,  Inc.'s Form 10-Q  Quarterly  Report for the fiscal
         quarter ended August 31, 1997.
----------------
*        Management  contracts and compensatory plans required to be filed
         pursuant to Item 14(c) of Form 10-K.


                                                        13

<PAGE>



     Exhibits Filed Herewith:

                  11       Computation of Earnings Per Share.

                  13       Excerpts from the Lilly Industries, Inc. 1997
                           Annual Report.

                  21       List of Subsidiaries.

                  23       Consent of Ernst & Young LLP.

                  27       Financial Data Schedule.

                  (b)      The Following  Reports on Form 8-K were filed
                           by Lilly  Industries,  Inc. during the fourth
                           quarter of fiscal 1997:

                           Report on Form 8-K filed on  October 17, 1997
                           filing a press release  announcing  the offer
                           of $100 million in ten year Senior  Unsecured
                           Notes  maturing in 2007 and the finalizing of
                           a  five  year  $175  million  unsecured  bank
                           revolving  credit  facility to replace an 
                           exisiting $300 million facility.

                           Report on Form 8-K filed on November 10, 1997
                           filing a press release announcing  completion
                           of the  offering  of $100  million  of Senior
                           Unsecured Notes and the closing of a new $175
                           million   unsecured  bank  revolving   credit
                           facility.

                  (c)      The  response to this portion of this item is
                           submitted  as  a  separate  section  of  this
                           report.

                  (d)      The  response to this portion of this item is
                           submitted  as  a  separate  section  of  this
                           report.










                                       14

<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date:         February 23, 1998
                                                 LILLY INDUSTRIES, INC.


                                                 /s/ Douglas W. Huemme
                                                 --------------------------
                                                 Douglas W. Huemme,
                                                 Chairman, President and
                                                 Chief Executive Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the  following  persons on behalf of the Company
and in the capacities and on the dates indicated.

        Signature                      Title                         Date
----------------------------     -------------------          ------------------
(1)  Principal Executive
     Officer and Director


/s/ Douglas W. Huemme            Chairman, President           February 23, 1998
-----------------------          and Chief Executive
Douglas W. Huemme                Officer



(2)  Principal 
     Financial Officer

/s/ John C. Elbin                Vice President,               February 23, 1998
------------------------         Chief Financial Officer
John C. Elbin                    and Secretary


(3)  Principal
     Accounting Officer

/s/ Kenneth L. Mills             Corporate Accounting          February 23, 1998
-----------------------          Director and
Kenneth L. Mills                 Assistant Secretary




<PAGE>

(4)  A majority of the
     Board of Directors


/s/ James M. Cornelius           Director                      February 23, 1998
----------------------
James M. Cornelius               



/s/ William C. Dorris            Director                      February 23, 1998
----------------------
William C. Dorris



/s/ Paul K. Gaston               Director                      February 23, 1998
----------------------
Paul K. Gaston



/s/ Harry MoRrison               Director                      February 23, 1998
----------------------
Harry Morrison, Ph.D.



/s/ Norma J. Oman                Director                      February 23, 1998
----------------------
Norma J. Oman



/s/ John D. Peterson             Director                      February 23, 1998
----------------------
John D. Peterson


/s/ Thomas E. Reilly, Jr.        Director                      February 23, 1998
----------------------
Thomas E. Reilly, Jr.


/s/ Van P. Smith                 Director                      February 23, 1998
----------------------
Van P. Smith


/s/ Robert A. Taylor             Director                      February 23, 1998
----------------------
Robert A. Taylor


<PAGE>

                                  SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
                    LILLY INDUSTRIES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>


COL. A                          COL. B                             COL. C                           COL. D             COL. E       
------                          ------         ----------------------------------------------       ------             ------
                                                                  Additions                              
Description                     Balance at         (1)               (2)             (3)            Deductions-         Balance
                                Beginning       Charged to        Charged to      Acquired in        Describe          at End of
                                of Period       Costs and        Other Accounts    Business                             Period
                                                Expenditures      -Describe       Combination  
<S>                             <C>              <C>                  <C>            <C>            <C>               <C>       
Year ended November 30, 1997:                                                                      
     Reserves and allowances                                                                       
          deducted from asset                                                                      
          accounts:                                                                                
     Allowance for doubtful                                                                        
          accounts receivable   $2,705,759       $  538,000       $   --            $     --         $1,104,759 (A)     $2,139,000
                                ==========       ==========       ======            ========          =========         ==========


Year ended November 30, 1996:                                                                    
     Reserves and allowances                                                                      
          deducted from asset                                                                    
          accounts:                                                                              
     Allowance for doubtful                                                                      
          accounts receivable   $2,050,922       $  510,826       $   --            $729,307           $585,296 (A)     $2,705,759
                                ==========       ==========       ======            ========           ========         ==========
                                                                                  
Year ended November 30, 1995:                                                                    
     Reserves and allowances                                                                     
          deducted from asset                                                                    
          accounts:                                                                              
     Allowance for doubtful                                                                      
     accounts receivable        $1,758,769       $  600,717       $   --            $     --           $308,564 (A)     $2,050,922
                                ==========       ==========       ======            ========           ========         ==========
                                                                                                   
                                                                                                 
</TABLE>                                                                        
                                                                              


Note A - Uncollectible accounts receivable charged off, net of recoveries.




                                       17