SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549
 
                                FORM 10-Q
 
 
          Quarterly Report Pursuant to Section 13 or 15(d) 
   X      of the Securities Exchange Act of 1934.
          For the quarterly period ended September 30, 1996 or
      
                         
          Transition Report Pursuant to Section 13 
          or 15(d) of the Securities Exchange Act of 1934.
          For the transition period from_______ to _______.
 
  
                      Commission File Number 01912
 
                            VACU-DRY COMPANY
 
          (Exact name of registrant as specified in its charter)
 
 
 
 
     California                                        94-1069729
 (State of incorporation)                                (IRS Employer
                                                  Identification #)
 
 7765 Healdsburg Ave., Sebastopol, California              95472
 (Address of principal executive offices)                (Zip Code)
 
 
 Registrant's telephone number, including area code:  707/829-4600         
     
 
                             Not-Applicable
 _____________________________________________________________________________
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last
 Report)
 
 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:____
 
 
 As of September 30, 1996, there were 1,635,867 shares of common stock, no par
 value, outstanding.
     
  <PAGE>

          Part I - Financial Information

 
 Item 2.  Management's Discussion and Analysis of
          Financial Condition and Results of Operations
 
 THIS FORM 10-Q CONTAINS FOWARD-LOOKING STATEMENTS WHICH INVOLVE RISK AND 
 UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
 THE RESULTS DISCUSSED IN THE FOWARD-LOOKING STATEMENTS AS A RESULT OF 
 CERTAIN OF THE FACTORS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K
 FOR THE YEAR ENDED JUNE 30, 1996. 

 The financial statements herein presented for the quarters ended September 30,
 1996 and 1995, reflect all the adjustments that in the opinion of management
 are necessary for the fair presentation of the financial position and results
 of operations for the period then ended.  All adjustments during the periods
 presented, are of a normal recurring nature.
 
 Liquidity and Capital Resources
 
 Because the Company's operations are seasonal in nature, the Company's liquid
 resources fluctuate during the year in a way that changes very little from
 year to year.  The inventory and accounts payable balances are normally at
 their lowest level as of the end of the fiscal year and their highest level
 as of the end of the second quarter.  This seasonal increase in the accounts
 payable balance results in a temporary increase in the Debt to Equity ratio.
 Normally during the first quarter of the fiscal year the inventory levels
 increase as a result of the beginning of the production season. As of 
 September 30, 1996, the Company's inventory was at one of the lowest levels
 in years.  The net working capital decreased from $4,136,000 as of June 30,
 1996 to $3,262,000 as of September 30, 1996. The decrease was a result of the
 the capital expenditure increase of $679,000 and the repurchase of common 
 stock of  $407,000.  This compares to a net working capital balance of 
 $3,882,000 as of September 30, 1995.
 
 The Company's liquidity resources are obtained from external and internal
 sources.  The Company's largest external source is a revolving line of credit
 provided by a bank at the Bank's prime rate. The Company has a revolving line
 of credit limit of $3,500,000 ($4,000,000 as of September 30, 1995) secured
 by inventory and accounts receivable. As of September 30, 1996, the Company
 did not have any borrowings outstanding on the line of credit.  As of
 September 30, 1995 the Company had $2,237,000 of available funds under the
 line of credit limit of $4,000,000. As of September 30, 1996, the Company was
 in compliance with all of the covenants and restrictions related to its
 outstanding debt. The most significant source of internal liquidity is the
 Company's net working capital. One possible source of long term liquidity 
 could be the sale of the idle production facility, although the Company is not 
 relying on the sale of this facility as a source of liquidity, the Company's
 short and long- term liquidity would materially increase upon such a sale. 
 At this time the Company is not pursuing the sale of this facility.  The 
 Company has been successful in leasing all of the idle facility other than 
 a portion  occupied by Product development.  The Company continues to lease
 a portion of its operating facility and is in negotiations with the primary
 tenant to increase their square footage.
 
 
 
 
 
  <PAGE>
 
                              -2-
 
 The Company has established a capital expenditure budget of approximately
 $1,520,000 for the 1996-1997 fiscal year. These funds will primarily be used
 to purchase new and refurbish existing equipment. The Company anticipates
 financing these assets through internally generated funds and through the use
 of debt financing. The Company has a commitment from a financial institution
 to fund $850,000 of the 1996 - 1997 capital budget.  As of September 30, 1996,
 the Company has not borrowed any funds related to this commitment.
                           
 During the first quarter ended September 30, 1996, the Company repurchased
 80,000 of common stock at a cost of $407,000 to offset the dilution caused by 
 stock issuances under the Company's stock purchase plan and under outstanding
 options.  The Company has no present intentions to repurchase any more stock 
 in the current fiscal year.
 
 
 
 Results of Operations
 
 Net sales decreased $436,000 or 7% in the first quarter of fiscal 1996.  This
 decrease was caused by the loss of the Confoco representation agreement
 business which was only partially offset by higher dried apple sales.  Other
 revenue increased $88,000 as a result of higher rental income and reimbursement
 of a product claim.
 
 The loss of the Confoco sales reduced our gross margin on a comparative basis
 from 8.4% as of September 1995 to 7.6% as of September 1996. Excluding
 the Confoco sales from the comparative figures for September 1995, the
 Company's gross margin on an on going basis improved slightly from 7.1% to
 7.6%.
 
 Selling, general and administrative expenses increased $57,000 or 13% in the
 first quarter. This change is a result of increased travel expenses and
 salaries as a result of hiring a regional sales manager.
 
 Interest expense decreased $52,000 as a result of the payoff of the balance
 on the line of credit and the interest income from investing  the temporary
 excess cash.
 
 
  <PAGE>
 
                              -3-
 
 
                              PART II
                            OTHER INFORMATION
 
 Item 1.  Legal Proceedings
               
               There are no legal proceedings pending.
 
 
 Item 4.  Submission of Matters to a Vote of Security Holders.
               
               No matters were submitted to a vote of security holders
                during the period covered by this report.
               
 
     
 Item 6.  Exhibits & Reports on Form 8-K
 
          a.   Exhibits  -  none
     
           b.   Reports on Form 8-K  -  none

<PAGE>


                                VACU-DRY COMPANY
                       CONDENSED STATEMENT OF EARNINGS
                                 (UNAUDITED)

                                  
                               Three Months           Three Months
                                   Ended                 Ended      
                                 9/30/96                9/30/95
                               ------------           ------------
REVENUES:
     
     Net sales                 $6,043,000              $6,479,000

     Other                        148,000                  60,000
                               ----------              ----------  
     Total revenue             $6,191,000              $6,539,000
                               ----------              ----------
COST & EXPENSES:

     Cost of sales              5,584,000               5,934,000

     Selling, general & 
       administration             494,000                 437,000

     Interest                      44,000                  96,000
                               ----------              ----------
                               $6,122,000              $6,467,000
                               ----------              ----------  

EARNINGS BEFORE INCOME TAXES       69,000                  72,000

PROVISION FOR INCOME TAXES         27,000                  29,000
                               ----------             -----------              
NET EARNINGS                   $   42,000             $    43,000
                               ==========             =========== 

EARNINGS PER COMMON SHARE            $.03                    $.03
                                     ====                    ====

WEIGHTED AVERAGE COMMON SHARES
  AND EQUIVALENTS               1,675,120               1,698,072
                                =========               ========= 
                 

                          See notes to interim financial statements


<PAGE>
                                             VACU-DRY COMPANY
                                                  Balance Sheets
                                                   (Unaudited)
                                             (Dollars in thousands)
<TABLE>

ASSETS                                                LIABILITIES AND SHAREHOLDERS' EQUITY
                       <C>       <C>      <C>                                           <C>       <C>       <C>                    
CURRENT ASSETS:        9/30/96   9/30/95  6/30/96     CURRENT LIABILITIES:              9/30/96   9/30/95   6/30/96

Cash                      $515      $215     $214     Borrowings under line of credit    $-0-      $1,763      $826

Accounts receivable      1,964    2,769     2,684     Current maturities of long-term debt  415       480       415

Other receivable            16      161      -0-      Accounts payable                    2,071     2,045       678

Inventories              3,802    5,369     3,430     Accrued payroll & related liabilities 640       621       476

Prepaid expenses            96      264       116     Accrued expenses                       72       261       106

Current deferred taxes     225      303       225     Deferred factory overhead             150       -0-       -0-
                        _______   ______   ______     
Total current assets    $6,618   $9,081    $6,669     Income taxes payable                    8        29       32

                                                                                         ______    ______   ______
                                                     Total current liabilities           $3,356    $5,199   $2,533
Net property, plant &                                                                    ------    ------   ------ 
equipment                7,335    7,252     6,918     
                                                      LONG-TERM DEBT - Net of
                                                         current maturities               1,525     1,985    1,628

                                                      DEFERRED INCOME TAXES                 748       912      748
 
                                                      SHAREHOLDERS' EQUITY:

                                                      Capital stock                       3,605     3,952    4,001
                                                      Retained earnings                   4,719     4,285    4,677
                                                                                          -----     -----    ----- 
                                                      Total shareholders' equity          8,324     8,237    8,678

                       _______   _______  _______     Total liabilities and             -------   -------  -------    
Total Assets           $13,953   $16,333  $13,587       shareholders' equity            $13,953   $16,333  $13,587
                       =======   =======  =======                                       =======   =======  =======  
</TABLE>

                                 See notes to interim financial statements

<PAGE>
                                VACU-DRY COMPANY
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995



                                          
                                          
CASH FLOWS FROM OPERATING ACTIVITIES:                                  
                                                     1996          1995

Net earnings                                      $42,000       $43,000 
                                                  _______       _______ 
Adjustments to reconcile net earnings to net
     cash provided by operating activities  -

     Depreciation expense                         262,000       229,000 

  Changes in certain assets & liabilities                 
     Decrease (increase) in receivables           704,000    (1,096,000)
     Decrease (increase) in inventories          (372,000)       45,000 
     Decrease (increase) in prepaid assets         20,000       (88,000)
     Increase in accounts payable               1,393,000     1,652,000 
    (Decrease) in accrued expenses                (34,000)     (131,000)
     Increase in accrued p/r & liabilities        164,000        97,000 
     Increase in deferred overhead                150,000           -0- 
     Increase (decrease) in income taxes payable  (24,000)       29,000 
                                                _________     _________ 
          Total adjustments                     2,263,000       737,000 
                                                _________     _________ 
      Net cash provided by(used for)
         operating activities                   2,305,000       780,000 
                                                _________     _________ 
CASH FLOWS FROM INVESTING ACTIVITIES:
      Capital expenditures                       (679,000)      (60,000)
                                                _________     _________ 
      Net cash (used for) investing activities   (679,000)      (60,000)
                                                _________     _________ 
CASH FLOWS FROM FINANCING ACTIVITIES:
      Additional borrowings under line of credit  253,000     2,713,000 
      Payments on line of credit               (1,079,000)   (3,301,000)
      Issuance of common stock                     11,000        16,000 
      Repurchase of common stock                 (407,000)          -0- 
      Principal payments of long-term debt       (103,000)     (120,000)
                                                _________    __________ 
      Net cash provided by(used for)
         financing activities                  (1,325,000)     (692,000)
                                                _________    __________ 
NET INCREASE IN CASH                              301,000        28,000 

CASH AT THE BEGINNING OF THE YEAR                 214,000       187,000 
                                                _________     _________ 
TOTAL CASH AT THE END OF THE PERIOD              $515,000      $215,000 
                                                =========     =========


                   See notes to interim financial statements
<PAGE>


                            VACU-DRY COMPANY
                  NOTES TO INTERIM FINANCIAL STATEMENTS                 
                  THREE MONTHS ENDED SEPTEMBER 30, 1996
 
 
 Note 1  -           The Interim Financial Statements herein presented for the
                     three months ended September 30, 1996, reflect all
                     adjustments which are in the opinion of management
                     necessary to a fair statement of the results of operations
                     for the period then ended. The statements are unaudited and
                     are not necessarily indicative of results for the full
                     year.
 
 Note 2  -          Inventories  -
 
                    Inventories are stated at the lower of cost, using the last-
                    in, first-out (LIFO) method or market.
 
                    The excess of current cost of the inventory over LIFO cost
                    was $2,113,000 at September 30, 1996 and $2,113,000 at
                    June 30, 1996.
               
                    Inventories at September 30, 1996 and June 30, 1996,
                    consisted of the following: 
 
                                            9/30/96         6/30/96 
                              
                    Finished goods         $2,694,000     $2,757,000 
 
                    Work in progress          201,000        233,000 
 
                    Raw materials, &
                        containers            907,000        440,000 
                                           __________     __________
                                           $3,802,000     $3,430,000

 
 Note 3  -          Statement of Cash Flows  -
 
               Interest and income tax payments reflected in the
               Consolidated Statement of Cash Flows were as follows:
                              
                                    1996          1995
 
               Interest paid        $45,000       $97,000   
               Income taxes paid    $53,000        - 0 - 
 
 Note 4  -          Income Taxes -
 
                The effective income tax rate for 1996 is 40%, which
                compares to 40% for 1995.  As of June 30, 1996, the Company
                has tax credit carryforwards of $62,000 and $99,000
                available to offset future federal and state taxable income.
<PAGE>
 
 
 
 
 
 
                               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.
 
 
                                                                  
                                   VACU-DRY COMPANY
 
 
 Date: November 13, 1996               (Gary L. Hess)
                                  _______________________
                                  Gary L. Hess, President  
 
 Date: November 13, 1996                (Tom Eakin)
                                  _______________________
                                  Tom Eakin, VP, Finance